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Could energy security push European markets over the edge?

Highlights

Across the MSCI Europe Index, the direct energy intensity of companies varies widely, particularly in the three most energy-intensive sectors - Utilities, Basic Resources and Construction & Materials.

As dependence on oil and gas imports grows, extraction becomes most costly and geopolitical factors heat up, the risk of energy supply failure in Europe rises. Trucost Analyst Rebecca Maclean asks, Are company's doing enough to mitigate the risk from energy security?

Across the MSCI Europe Index, the direct energy intensity of companies varies widely, particularly in the three most energy-intensive sectors - Utilities, Basic Resources and Construction & Materials. 37% of companies in MSCI Europe publicly disclose fossil fuel consumption data. Direct energy consumption data can be normalised by revenues, in € millions, to compare the energy efficiency of companies of different sizes. The chart below highlights the range in energy efficiency of European companies within six sectors. 38% of Utilities companies that disclose direct energy consumption data have an above average energy intensity. These companies, representing 2% of the index (weighted by market cap), would be most at risk from fossil fuel price volatility and supply failure. Chart 1: Energy efficiency variance in MSCI Europe Energy Efficiency Varience in MSCI Europe