For the second time in just a few weeks, Europe is experiencing an exceptional heatwave.
Temperatures have exceeded 40°C across parts of Spain, France, Italy and Germany. Authorities have issued widespread heat alerts, wildfires have intensified, and transport, agriculture and public infrastructure are already feeling the impact. The World Meteorological Organization (WMO) warns that events like these are no longer exceptional - they are becoming part of Europe's changing climate.
This raises an important question for long-term investors: How do you invest in a world where climate resilience is becoming increasingly valuable?
Climate change is becoming an investment issue
Climate change is often discussed as an environmental challenge. Increasingly, it is also becoming an economic one.
Heatwaves reduce agricultural productivity, increase insurance claims, damage infrastructure, raise energy demand and place additional pressure on water resources. According to the European Environment Agency, climate-related weather extremes have caused more than €790 billion in economic losses across Europe since 1980, with heatwaves becoming one of the fastest-growing climate risks.
These trends are also influencing capital allocation. The European Investment Bank (EIB) identifies climate adaptation and nature-based solutions as strategic investment priorities, recognising that resilient natural ecosystems are becoming increasingly important to Europe's long-term economic resilience.
Institutional investors are increasing allocations to real assets and natural capital as part of long-term portfolio diversification and resilience.
Forests are not a quick fix - but they are one of the few long-term ones
No serious climate scientist argues that planting trees alone will solve climate change.
However, organisations including the IPCC, the European Environment Agency (EEA) and the World Meteorological Organization consistently recognise forests as one of the most effective long-term nature-based climate solutions.
Why? Because forests do far more than store carbon.
A well-managed forest also:
captures atmospheric CO₂;
cools surrounding landscapes through shade and evapotranspiration;
improves water retention;
reduces soil erosion;
supports biodiversity;
and provides renewable raw materials that can replace more carbon-intensive materials.
These benefits become more significant as forests mature and are managed sustainably.
Location matters
Forest growth depends not only on how forests are managed, but also on the conditions they grow in.
Latvia receives approximately 700-800 mm of precipitation annually, compared with 300-600 mm across much of southern Spain. During this summer's heatwave, temperatures exceeded 42-44°C across parts of Spain and Italy, while Latvia recorded highs of around 30-33°C.
These differences do not make Latvia immune to climate change. However, they do create conditions that generally place forests under less drought stress and reduce wildfire risk compared with many parts of Southern Europe. Combined with regular rainfall, this supports healthier forest growth and the long-term productivity of timber resources.
According to FOREST EUROPE, Latvia's standing timber volume has increased three to fourfold over the past 80 years, a result of both favourable growing conditions and sustainable forest management.
Together, these factors help position Latvia as one of Europe's strongest regions for long-term forestry investment.
Europe needs more resilient landscape - not only lower emissions
Climate adaptation is becoming just as important as climate mitigation.
The EU Forest Strategy for 2030 recognises forests as essential for increasing Europe's resilience to climate change, improving biodiversity, protecting water resources and strengthening the resilience of rural landscapes. At the same time, the European Investment Bank has financed forestry projects for more than 40 years and, in 2024 alone, supported the restoration or establishment of approximately 215,900 hectares of forest across Europe and beyond.
That makes afforestation more than an environmental initiative. It is a long-term investment in Europe's future resilience.
Why this matters to investors
One newly planted hectare will not change next summer's weather.
But over the next 30, 50 or even 100 years, it can become a productive forest that stores carbon, supports biodiversity, strengthens local ecosystems and grows into a tangible biological asset.
The value of a professionally managed forest is created gradually through biological growth, active management and disciplined long-term decision-making.
That combination of long-term biological growth and professional management is one of the reasons forestry continues attracting institutional capital seeking resilient, real assets.
The role of LFDF
At the Latvian Forest Development Fund, we see afforestation as more than planting trees. It is the creation of productive forest assets that will continue to grow for generations while contributing to Europe's long-term climate resilience.
As Europe adapts to a changing climate, the value of well-managed forests extends beyond timber alone. They combine biological growth, active management and natural resilience in a way few other asset classes can.
For long-term investors, that means investing in assets designed not only to withstand change, but to create value through it.
