Μake us preferred on Google The climate emergency and the degradation of nature represent a rapidly growing threat to the global economy, according to a senior European Central Bank (ECB) official, as major wildfires continue to affect countries including France, Spain and Greece.
Frank Elderson, a member of the ECB’s Executive Board, said the central bank is increasing its monitoring of financial risks linked to the destruction of “ecosystem services” — the natural processes and assets that support human activity.
“These services are not stable, but are rapidly declining. That is why we are talking about a climate and environmental crisis,” Elderson said.
“Knowing this dependence and knowing the exposure of banks to these risks, we conclude that this issue is significant,” he added.
Wildfires Highlight Economic Risks
Across France and Spain, wildfires have spread amid record-breaking temperatures, destroying land, businesses and homes. The disasters are expected to carry a significant economic cost beyond their immediate human impact.
In an interview with the Guardian before the latest wave of disasters across Europe, Elderson said it was clear that the increasing frequency of natural disasters linked to global warming posed a threat to financial stability.
He said more efforts are needed to assess the risks created by the collapse of ecosystem services, noting that humanity’s dependence on nature is more complex to measure than the effects of a single extreme weather event.
Nature-Related Risks and the Economy
Ecosystem services refer to the benefits provided by natural systems and processes. For example, water can serve as a raw material, a source of energy through hydropower or a means of transportation.
Natural systems also provide habitats for marine life that are essential for food production, while supporting recreational activities.
“Nature-related risks can entail substantial economic and financial risks, including through their impacts on credit risk, growth, inflation and — over the longer term — potential financial instability,” Elderson said.
