The European Central Bank says the climate crisis and the destruction of natural ecosystems pose a growing threat to the global economy and financial stability. Frank Elderson, a member of the ECB's executive board, said so in comments to The Guardian.
Elderson said the ECB is stepping up its assessment of financial risks tied to the degradation of so-called ecosystem services, the natural processes and resources that economic activity depends on. He named water resources, soil fertility, pollination and biodiversity among them.
Elderson said risks linked to the degradation of natural ecosystems could carry significant economic and financial consequences. He said they affect credit risks, economic growth rates and inflation, and could undermine financial stability over the long term.
Study on Bank Credit Losses
Elderson said the ECB is preparing a study to show how the deterioration of ecosystems could turn into credit losses for eurozone banks. The bank plans to publish it before the end of the year.
The interview was recorded before the large wildfires in France and Spain, but Elderson said the rising number of natural disasters linked to global warming only confirms the relevance of these risks.
US Withdrawal From Climate Network
Elderson noted that despite the change in political direction in the United States following Donald Trump's return to power, and the country's withdrawal from the Network for Greening the Financial System, an international group of central banks focused on climate risk, European banks continue to recognize the importance of assessing climate and nature-related risks.
Elderson said he had previously told interviewers that destroying nature means destroying the foundation economies depend on, a point that drew attention. He said this is not about "hippie culture" or a romantic attachment to nature, but a matter of fundamental economics, financial stability and price stability.
Drought Hits Power Plants and Rivers
Romania shut down both reactors at its only nuclear power plant, Cernavoda, in late July because of a critical drop in the water level of the Danube caused by severe drought. Hungary's only nuclear plant, Paks, also had to shut down because of record-low Danube water levels, the first such shutdown in its 44-year history.
The water level of the Rhine fell to nearly its lowest point in eight years due to extreme heat and drought in Europe, forcing some German businesses to cut production.
