Recap: 2025 Davos CEO Roundtable

On 21 January, FCLTGlobal convened its annual Davos CEO Roundtable for leaders from across industries to discuss the current state of Europe’s investment landscape. Several views were consistent among the group: Regulations and inconsistent policy across the region continue to stymie opportunities for growth, but valuations there – especially relative to the U.S. – may make it attractive. Europe has real opportunities for appreciation if policymakers can unleash its strengths.

In many ways, the roundtable was a harbinger of conversations around Davos throughout the week, where Europe’s status as a destination for long-term investments was put under the microscope.

Regulatory Challenges and Reform

One of the central themes of the discussion was the regulatory landscape and its profound impact on European markets. Participants emphasized that while each regulation is practical on its own, the cumulative weight of various regulatory frameworks stifles innovation and hinders economic growth, effectively turning the EU into a culture of “no” versus the culture of “yes” in other countries, as one participant put it.

Another participant questioned the combined effect of EU business regulation, “When you come into a bar, each bottle tastes good, but when you mix them all, not so much.”

Participants stressed the importance of moving beyond incremental changes and adopting substantial policy reforms that prioritize innovation, sustainability, and resilience. Several participants pointed to the future of European competitiveness (commonly known as the “Draghi report”) as an example of the necessary policy reforms needed to tackle Europe’s competitiveness challenges head-on, with an emphasis on regulatory harmonization and streamlining to enhance industrial competitiveness and attract investment.

Fragmented Markets and the Impact on Capital Flows

The fragmentation of markets across European countries – and the resulting complexity in operating across borders – were underscored as significant barriers to efficient investment and growth strategies.

As a result, there has been a significant flow of capital out of the EU, notably towards the United States, driven by higher returns, a culture of innovation, and a more favorable investment climate. This “gravitational pull” of US markets has raised concerns about Europe’s ability to retain and attract sufficient investment capital to fuel its economic growth – and has introduced a considerable imbalance to investment portfolios with significant and growing tilts towards the U.S. However, some investors in the room pointed out that while other markets have clear comparative advantages, opportunities do exist – particularly relative to current valuations. There is a concern that limiting capital flows across borders may be the inevitable solution. “If you force capital to remain domestic, you don’t address the underlying issues facing the economy,” said one participant.

Similarly, from the corporate perspective, investments in capex and other projects have largely followed demand hubs and have been positioned to avoid excessive tariffs.

“There was a self-fulfilling prophecy 8-10 years ago. We saw more tariffs around the world and needed a supply base closer to the demand side. [This led us to] allocating capex to China, India, the US, Mexico, and elsewhere to supply markets where there’s growth.”

There was a consensus among participants on the need for greater harmonization and simplified regulation to improve integration and efficiency and to create an environment that encourages the deployment of “patient” capital across diverse sectors of the European economy.

Changing Energy Markets

The future of energy emerged as a critical concern during the discussion. Europe is one of the most expensive markets globally for energy-intensive industries – such as automotive, chemicals, fast-moving consumer goods, etc. This has prompted companies to evaluate their long-term viability in Europe compared to more cost-competitive areas like China and the United States. One participant pointed out that, since the end of COVID-19, Europe has entered a “second stage” of de-industrialization, with industrial demand down 20 percent, and has yet to recover. This decline has left Europe uncompetitive even in its domestic markets.

The conversation highlighted the imperative for investment in clean energy and technological innovation to address the challenges of energy affordability and security – particularly with the growth of AI and its outsized energy demands. Participants stressed the importance of balancing environmental goals with industrial competitiveness to sustain Europe’s position as a global leader in sustainable practices.

Opportunities and the Path Forward

Despite the formidable challenges, there was a prevailing belief that opportunities in Europe may be overly discounted:

Specific companies in sectors such as healthcare innovation, digital transformation, and renewable energy; “Seeking alpha even if beta is low,” as one participant put it.
Long-term capital’s ability to leverage Europe’s strengths in research and development, human capital, and regulatory expertise to capitalize on sustainable economic recovery.
Increased equity ownership and investment innovation, mainly through exchanges and clearing houses.

While Europe faces significant headwinds in attracting and retaining long-term capital, the region’s underlying strengths and current valuations suggest opportunities for discerning investors. The path forward requires decisive action. As global competition for investment capital intensifies, Europe’s success will depend on its ability to transform these challenges into catalysts for reform, leveraging its considerable advantages in human capital, innovation, and sustainability to create an environment where patient capital can thrive. The next few years will be crucial in determining whether Europe can realize its potential as a destination for long-term investment.