Climate change is often discussed as an environmental issue, but its growing economic cost means it is becoming increasingly difficult for investors to ignore.

Extreme weather has already created significant financial damage across Europe. According to the European Environment Agency, extreme weather events caused €822bn of damage between 1980 and 2024, with a quarter occurring in just the past four years. Beyond rebuilding costs, these events can push up food prices and disrupt supply chains.

For investors, one of the more concerning consequences is the potential impact on government finances. The idea of a "climate-sovereign doom loop" is that rising climate-related costs weaken a country's finances, increasing borrowing costs and leaving governments with less money to invest in preventing future damage. This could become particularly important for already highly indebted countries.

Europe also appears underprepared. EU countries currently spend around €29bn annually on climate adaptation and mitigation, compared with the €70bn estimated to be needed. This gap matters because preventative investment can be far cheaper than dealing with the consequences later.

There could also be wider financial implications. European banks hold large amounts of government debt, including bonds issued by other EU countries, creating the possibility that climate-related fiscal problems in one country spread elsewhere.

For investors, climate risk therefore increasingly looks like more than an ESG consideration. If extreme weather begins affecting sovereign creditworthiness and financial stability, understanding a country's exposure to climate risk could become an important part of assessing its bonds and wider investment outlook.

- George Tyson

The five-month conflict with Iran has burned through munitions much faster than they can be replaced. According to CNN, “nearly 80% of interceptors for key missile defence systems have been depleted.” Patriot and THAAD air defence platforms were particularly hit hard, with the military consuming roughly 80% and 50% of their respective inventories.

This is mainly down to the largest air defence requirements needed in the face of hordes of  Iranian Shahed drones, which force defending countries to employ multi-million-dollar missile systems against these inexpensive targets. Furthermore, analysts have highlighted how the shift in the structure of the defence industry since the end of the Cold War has meant there are now fewer contractors, and the sector is now geared towards peacetime production rather than surge capacity. 

Whilst President Trump denies the leaks of weapons shortages, stating on Truth Social, "The U.S. has massive amounts of 'munitions,' especially of certain types", the Pentagon’s actions state otherwise. In an Aug 5th memo, Deputy Defence Secretary Steve Feinberg stated to defence-industry leaders that they have 21 days to submit plans for “significantly faster, more aggressive delivery schedules and/or increased production for critical capabilities.” The Army also opened five military test ranges to private manufacturers to speed up testing and development. 

With future conflicts likely to occur in select regions, the U.S. military has to vastly improve its industrial efficiency if it is to maintain a constant military presence across the globe.

- Chandresh Mohan

Global private equity and venture capital firms recorded 1,504 exits in the first half of 2026, down 6% from the 1,601 exits recorded in the first half of 2025, according to S&P Global Market Intelligence. Exit value looked resilient only because of one transaction: SpaceX’s $250 billion acquisition of xAI in February, which masked a broader deceleration now in its second consecutive quarter. 

The exit slowdown is part of a wider bifurcation. Deal volume declined 34% in the first half of 2026 while average deal size rose nearly four times compared with the first half of 2025, as capital concentrated in higher-conviction bets, according to PwC. That shift has changed how limited partners score managers: DPI has become the more closely watched metric, ahead of IRR, as investors prioritise actual distributions over paper gains. 

The pattern extends into 2025’s exit rebound, which reached $905 billion in global value but 78% of that was concentrated in mega-exits, leaving mid-market inventory effectively stagnant, per Allianz research. The knock-on effect shows in fund performance: 2021-vintage venture funds are sitting at a five-year DPI of just 0.05x, the lowest of any vintage since 1997, though the 2012 vintage also crawled to a slow start before leading the field with 2.04x by year ten. 

Continuation vehicles and GP-led secondaries have become the release valve, with the GP-led market rising 51% in 2025 to a record as sponsors recapitalise prized assets rather than sell them outright. For an industry sitting on a backlog of ageing, unsold portfolio companies, secondaries are increasingly filling the space traditional exits used to occupy.

- Saiee Katarkar

Until next time,

The Long and Short

Markets, Made Sense