Europe is finally executing

Europe is finally executing For much of the past decade, investors concrete tunnel elements to form the world’s longest immersed tunnel between Denmark and Germany.1 In the have been told that Europe had potential. UK, Eastern Green Link 12 provides a similar example of The continent offered attractive valuations, infrastructure moving from planning into implementation. world-class companies and ambitious policy Permanent onshore works are under way on a 2 GW initiatives. Yet potential alone rarely drives subsea electricity link designed to transport renewable power from Scotland to England, with major cable and equity returns. converter-station contracts already awarded. Like most large-scale infrastructure projects, both initiatives face What matters is execution. Today, the narrative is cost, permitting and delivery challenges. Yet they also changing. Across Europe, investment is moving from illustrate an important shift. Europe’s energy transition policy ambition into physical infrastructure. In the Baltic and cross-border connectivity are increasingly moving Sea, the Fehmarnbelt Tunnel project illustrates this shift from targets and announcements into contracts, toward massive, tangible reality. Backed by EU funding construction activity and critical infrastructure assets that through the Connecting Europe Facility, workers are can support electrification, energy security and long-term actively casting and submerging the first of 89 massive industrial competitiveness.

Andrew Koch Grant Cheng Carola Dorn Senior Portfolio Senior Portfolio Product Specialist Manager Manager

Exhibit 1: The market is starting to reflect what the economy has not yet fully recognised

Indexed value (Q2 2011 = 100) 270

EU-27 GDP (nominal, current prices) UK GDP (nominal, current prices, GBP) MSCI Europe (Net Total Return, EUR)

Source: LSEG Datastream (MSCI, ONS); Eurostat, as of July 29, 2026. MSCI Europe Net Total Return Index, nominal gross domestic product (current prices, seasonally and calendar-adjusted) for the EU-27 and the United Kingdom, quarterly, normalized to 100 as of Q2 2011. EU/UK GDP data available through Q1 2026 (Q2 2026 is expected to be released in mid-August 2026); most recent quarters may be subject to revision. Past performance is not a reliable indicator of future returns.

Previous discussions around European equities often Infrastructure projects are being funded, electricity grids focused on valuations, dividend resilience or sector are being modernised, industrial policy is becoming opportunities. Those factors remain important. However, more coordinated and capital is increasingly being the more relevant question today may be different. directed towards strategic areas of the economy. What happens when Europe starts delivering on the Europe is no longer defined solely by future potential. investments it has already committed to? Financial Increasingly, the focus is shifting from what Europe markets often recognise structural change long before it could become to what Europe is already delivering. becomes fully visible in economic data. European economies have remained resilient despite continued tensions in the Middle East, while corporate Over time, European nominal GDP has continued to earnings have surprised positively in recent quarters. grow steadily, reflecting the expansion of the real Companies in the STOXX Europe 600 reported earnings economy. Equity markets, however, have compounded growth of around 22.4%, 3 the strongest increase at a meaningfully faster pace. The relationship illustrates since late 2022. At the same time, Eurozone growth an important principle of long-term investing. Successful expectations for the year have been revised upwards companies do not merely participate in economic growth, from 0.5% to 0.8% 4 after economic activity proved they amplify it through productivity gains, innovation, stronger than anticipated. While regional differences pricing power and capital discipline. For investors, the remain, with countries such as Spain continuing to stock market has historically captured far more value outperform and Germany recovering more gradually, than economic activity alone. these…