The ECB considers global warming to be a serious threat to banks

The European Central Bank (ECB) also considers global warming to be a serious threat to banks. "Climate change also poses an unprecedented risk to the financial system," Isabel Schnabel, a member of the ECB's Executive Board, told the German weekly Focus. She pointed out that about a third of the loans provided by banks in the euro area to companies are largely or increasingly exposed to risks caused by extreme weather. This was shown by a macroeconomic stress test in which the ECB evaluated data from 2,000 banks and 4 million companies. "We have taken into account the consequences of natural disasters, such as floods, forest fires and droughts, which cause great losses to companies, and therefore to banks and insurance companies. In addition, many measures to move to a greener economy pose a danger to the business models of many companies." According to her, the results of the ECB's stress test show that "the faster we react, the better. Then we will still be able to shape the transition to climate neutrality in a way that allows companies to adapt. The longer we wait, the faster and more radical we will If this transition comes too late or too quickly, many companies may go into insolvency and banks may face high levels of non-performing loans. " Schnabel added that the ECB had already clearly signaled to banks that they had to start taking into account the risks associated with climate change.