Are Rising Temperatures Raising Prices?

We have had the warmest recorded temperatures in Europe and the UK this summer. Your garden, like mine will tell its own story and we are all aware of hosepipe bans in certain parts of the country, from our terribly run water infrastructure. You are probably aware of the increasing use of energy and water by data centres to power and cool computers for which the demand due to AI is almost exponential.

AI advocates promise that the technology will enable us to solve the energy crisis, but the climate and planet is paying the price. In Europe the subsequent drought has resulted in existing energy supplies being reduced, some countries even turning off nuclear power plants due to an inability to cool the system. Cooling (water) is also used in gas and even hydro dams have been impacted by reduced capacity. Even the wind turbines have had reduced output due to unusually low levels of wind. The only winner in 2026 has been solar, but with the caveat that there simply isn’t enough battery storage for excess energy.

It will likely take many weeks for rainfall to replenish water supplies and rivers, the predicted more extreme weather may well mean it all arrives at once, or not at all. Peter Magyar the Hungarian PM has been urging his country to conserve energy use, the problem is that the hot weather has resulted in increased use of air conditioning units. It’s a vicious circle.

Increasing costs of energy are quickly seen by each of us, but there are obvious subsequent effects on the price of production of almost everything. This is likely to result in sustained inflation levels and I suspect relatively high valuations of companies in the energy and utility sectors. I think it reasonable to assume we will be seeing increased prices in most of the things we all buy regularly, food being the most obvious. Where possible buy locally from a farmer near you. Whilst the more lunatic members of our political establishment may be in denial about climate change and think it’s just a hot summer with better English wine; the truth is rather different.

Sustainable energy is vital for our survival and I don’t know if we are actually past the tipping point as some people fear. We can all take some action, which might include using a portfolio that attempts to remove polluters and fossil fuel companies or at least dramatically reduce any allocation to them. So get in touch if you would like us to make this adjustment to your investments.

Here is video of Julia Dreblow, (who I have known since the early 1990s!)  who now runs research for advisers into this area. This is an old video (2022) of a talk on the basics of sustainable investing, which you may find of interest. She now runs her own annual conference that I try to get along to each year. As Julia says, there are lots of debates, grey areas and differing opinions, however, the problem is here and now undeniable.

Your portfolio can have a sustainability element to it. Whilst we would still largely be “buying the haystack” (rather than searching for the illusive needle) we can trim out some of the nastier stuff. As ever, the world and our knowledge of it is evolving and we have to adapt to new world reality.

References: 

Jellyfish and drought in France: https://www.euronews.com/my-europe/2026/08/12/heatwave-and-jellyfish-a-fifth-of-french-nuclear-capacity-offline

European Power Plants reducing output: https://www.newcivilengineer.com/latest/droughts-causing-nuclear-power-plants-in-europe-to-reduce-output-05-08-2026/

Hungarian PM concerns about power supplies at Paks: https://youtu.be/vpVsRTGmtd4?si=n-OAmFOPkXvKqBU9

International Energy Agency: https://www.iea.org/countries/united-kingdom

Energy mix – EU Eurostat: https://ec.europa.eu/eurostat/web/interactive-publications/energy-2026

Julia Dreblow’s Fund Ecomarket: https://www.fundecomarket.co.uk/

Julia Dreblow: https://www.fundecomarket.co.uk/about-us/

What we do: https://www.solomonsifa.co.uk/what-we-do/