The Financial Impact of Heatwaves on Agriculture & Livestock in Europe

A comparative assessment across France, Spain, Germany, Poland and Ukraine (2027–2031)

White Paper

Produced by ATLARIS

 Executive Summary

Heatwaves are becoming one of the most material physical climate risks affecting European agriculture. Beyond their direct consequences on crop yields and livestock productivity, prolonged heat events increasingly affect farm profitability through lower revenues, higher operating costs, and growing investment needs for adaptation.

This white paper presents a comparative financial assessment of heatwave impacts on NACE A01 – Crop and Animal Production, Hunting and Related Service Activities across five major European agricultural economies: France, Spain, Germany, Poland, and Ukraine.

Using ATLARIS' environmental financial modelling methodology, the analysis estimates how projected heatwave intensity and frequency may affect sector revenues and operating expenses between 2027 and 2031. Rather than relying on qualitative climate indicators or ESG scores, the assessment translates physical climate hazards into financial variables directly usable by investors, lenders, insurers, and corporate decision-makers.

The results reveal substantial differences between countries, reflecting variations in climate exposure, agricultural systems, and sector vulnerability. Spain and Ukraine emerge as the most financially exposed, while Germany shows comparatively higher resilience under the selected assumptions.

Introduction

Heatwaves are no longer exceptional climatic events. Across Europe, rising temperatures, longer heatwave periods, and more frequent temperature extremes are increasingly disrupting agricultural production.

For crop production, excessive temperatures reduce photosynthesis, accelerate evapotranspiration, shorten grain-filling periods, and ultimately reduce yields and product quality. Livestock systems are similarly affected through heat stress, resulting in lower milk production, reduced weight gain, fertility issues, and higher mortality during prolonged extreme events.

These physical impacts rapidly translate into financial consequences.

Reduced production volumes directly affect revenues, while additional irrigation, cooling systems, veterinary care, crop protection measures, and water management significantly increase operating expenses.

Understanding these financial consequences has therefore become essential for banks, investors, insurers, agribusinesses, and public institutions.

Methodology

The assessment was performed using the ATLARIS environmental financial modelling framework.

The analysis focuses on:

Sector

• NACE A01 – Crop and Animal Production, Hunting and Related Service Activities

Countries

• France

• Spain

• Germany

• Poland

• Ukraine

Only physical climate risks associated with heatwaves were considered.

Revenue impacts were estimated from the following hazards:

• Heat stress reducing crop productivity and quality

• Heatwave days and temperature anomalies

• Heatwaves causing crop stress, lower milk yield, lower livestock weight gain and livestock mortality

• Heat damage during flowering and grain filling reducing agricultural output

Operating expense impacts were estimated using:

• Heatwave days and temperature anomalies

• Heat stress increasing cooling, shading and crop protection costs

• Heatwaves increasing cooling, water management and livestock management costs

The results presented correspond to ATLARIS financial impact estimates under a severe but plausible climate scenario for the period 2027–2031.

Results

Revenue impacts

Figure 1: Heatwaves Impact on Agriculture & Livestock GDP

Revenue deterioration accelerates across all

five countries over the analysis period, although the magnitude differs substantially.

Spain appears as the most exposed agricultural economy. By 2029, sector revenues are estimated to decline by approximately 32%, remaining at that level through 2031. Such results reflect the country's high exposure to prolonged drought conditions, water scarcity, and recurrent extreme heat events affecting both crop production and livestock systems.

Ukraine also exhibits severe financial impacts. Revenue losses increase rapidly until reaching approximately 25% by 2029. Although agricultural productivity remains high, the combination of continental climate conditions and increasing heat intensity creates substantial operational vulnerability.

Poland follows a progressive deterioration pattern. Revenue losses increase from approximately 5% in 2027 to around 25% by 2031, illustrating how regions historically considered less exposed may experience significant financial consequences as climate conditions evolve.

France experiences a more gradual but persistent deterioration. Revenue reductions increase from approximately 4% in 2027 to 22% by 2031. Heat stress affecting crop productivity and livestock production progressively erodes agricultural output over the assessment period.

Germany remains comparatively the most resilient country among those analysed. Nevertheless, revenues still decline by approximately 12% by 2031, demonstrating that even relatively moderate climatic exposure generates material financial consequences.

Overall, the results suggest that heatwaves increasingly threaten agricultural revenues across Europe, although the timing and severity differ according to regional climatic conditions and sector characteristics.

Operating expense impacts

Figure 2: Heatwaves Impact on Agriculture & Livestock Expenses

Heatwaves also generate substantial increases in operating expenses.

Unlike revenue losses, operating costs increase continuously as producers implement adaptation measures and respond to deteriorating climatic conditions.

Germany and Poland experience the strongest cost escalation, with operating expenses increasing by approximately 18% by 2031. Higher cooling requirements, irrigation, crop protection, livestock management, and water consumption become increasingly important cost drivers.

Spain and France also show sustained operating cost inflation. By 2031, operating expenses increase by approximately 12% and 11%, respectively. While revenue losses differ significantly between both countries, the operational response required to maintain production becomes progressively more expensive.

Ukraine displays a slightly different profile. Operating expenses increase rapidly during the first years before stabilizing around 10% after 2029, suggesting that productivity losses increasingly dominate overall financial performance.

Taken together, declining revenues and increasing operating costs create a compounding effect on agricultural profitability.

Financial implications

The analysis highlights an important observation.

Heatwaves rarely affect only one financial variable.

Instead, they simultaneously reduce production volumes while increasing the resources required to maintain agricultural operations. This double financial effect gradually compresses operating margins, weakens cash generation, and reduces long-term enterprise value.

For lenders, investors and agribusinesses, understanding these transmission mechanisms becomes increasingly important when assessing investment decisions, financing conditions, portfolio resilience and long-term adaptation strategies.

Traditional climate indicators describe environmental exposure.

Financial decisions require understanding how those hazards ultimately affect revenues, operating expenses, capital expenditure, cash flows and valuation.

Conclusion

Heatwaves are becoming one of the defining financial risks for European agriculture.

The comparative assessment presented in this paper demonstrates that identical climate hazards can generate materially different financial outcomes depending on regional exposure, sector vulnerability and operating conditions.

By translating physical climate risks into financial variables, ATLARIS enables financial institutions, investors and corporates to move beyond qualitative climate assessments and integrate environmental risks directly into financial analysis, investment decisions and strategic planning.

As climate events become more frequent and more intense, pricing environmental risk will increasingly become a prerequisite for sound financial decision-making.

Related Research Areas

• Climate Risk Assessment

• Environmental Financial Risk

• Sustainable Finance

• Physical Climate Risk

• Agricultural Economics

• Biodiversity Risk

• Transition Risk

• Financial Scenario Analysis

• Climate Adaptation

• Investment Risk