By Sofia Gerace and Chloé Meley Europe’s worsening heat waves, wildfires and floods are prompting governments to increase spending on climate-resilient infrastructure, opening a lucrative new market for industrial companies.

Industrial equipment makers including Schneider Electric SE, ABB Ltd., and Siemens AG stand to benefit from a rush to harden buildings and grids against increasingly extreme weather. EU and UK government investment specifically to make infrastructure more resilient is expected to total about €500 billion ($561 billion) over the next decade, according to Bloomberg Intelligence.

Demand for cooling, electrical and grid equipment has been driven by data-center construction in recent years. Climate adaptation is set to provide another growth driver, with investment targeting many of the same technologies used in data centers, including electrical resilience, grid reinforcement and systems to automate building energy use.

“Industrials have done phenomenally well from AI-related demand, and there are murmurings about whether that demand is slightly tempering out,” BI analyst Grace Osborne said in an interview. “Climate adaptation adds a layer of demand.”Schneider Electric raised its profit guidance after an artificial intelligence-driven spending spree drove unprecedented demand for its data-center equipment. European peers ABB and Siemens have also benefited from the boom.

“Whenever there’s concerns on the data center build-out slowing down, these companies do sell off very materially,” said Matthew Donen, analyst at Morningstar. “The reality is that a lot of the equipment can be repurposed in different infrastructure buildings.”

This year’s summer was a “wake-up call” on heat, while concern about energy security has been building since Russia’s invasion of Ukraine, Citi analyst Martin Wilkie said. “When you get the combination of structurally higher energy costs and heat causing problems for health, whether it’s in people’s homes, in hospitals, in schools or in care homes, there’s a recognition that something needs to happen around that.”The opportunities span buildings and power grids. Europe’s building upgrades have largely focused on cutting emissions, though rising temperatures are now driving demand for cooling, ventilation and automated controls.

That could benefit companies such as Alfa Laval AB and Munters Group AB, whose cooling technologies are already riding the data-center boom, according to BI research.

More frequent wildfires and floods are also increasing pressure to strengthen aging electricity networks against extreme weather.

AI data centers and the broader electrification of buildings, transport and industry are separate sources of power demand, though both require investment in the same electricity grids.

“For Schneider, ABB and Siemens, a lot of the technology is the same,” Wilkie said. “They’re selling breakers, transformers and control software that optimize power management, whether it’s in a data center, on the grid or in an industrial facility.”Schneider Electric already acquired risk intelligence provider AiDash for $350 million in July, which adds wildfire- and storm-risk management to its existing smart-grid offering. It also doubled down in AI with its agreement to buy industrial software firm PTC Inc. for about $22.6 billion, stepping up its AI capabilities.

BI research shows 64 European companies positioned to benefit from rising climate-related costs — including Siemens, ABB, and Munters — outperformed the equal-weight Stoxx Europe 600 Index by 13 percentage points annually over the past five years, and 2.5 percentage points through August.

The EU estimates it will need about €70 billion a year in climate-adaptation investment through 2050 to reduce exposure to growing risks, as the bloc shifts spending from disaster response to damage prevention.

That’s already translating into big orders. Italy’s Prysmian SpA won a €910 million Greek-island interconnection contract to install submarine and land-based cables, while France’s Enedis won a €550 million contract to modernize the French power grid.

Private capital is expected to play a growing role in climate adaptation, coupled with public funding. The challenge will be deploying the funds fast enough.

The EU’s Cohesion Fund, which supports climate adaptation project by certain member states, had a budget of €17.8 billion for 2021 to 2026, though only €2.5 billion of that has been spent to date, with the remainder expected to be released between 2027 and 2029, BI said.

“The speed at which that capital is allocated is a challenge,” BI’s Osborne said.