Frank Elderson, a member of the European Central Bank executive board, warned that the climate emergency and the breakdown of nature pose a dramatically growing risk to global financial stability as wildfires rage across Europe. Elderson said the ECB is stepping up monitoring of risks tied to the loss of ecosystem services, which he defined as nature-related processes or assets that support human activity, and warned those services are in rapid decline. He said nature-related risks can affect credit risk, growth, inflation and over the long term potential financial instability, and that mapping dependence on ecosystem services is more complicated than assessing a single extreme weather event. As the supervisor responsible for Europe’s largest banks, the ECB has launched a programme of work and plans to publish analysis later this year on how ecosystem degradation pathways could translate into credit loss dynamics for eurozone banks. Elderson noted his role in creating the Network for Greening the Financial System and said the NGFS now includes 114 central banks and supervisors, while the United States withdrew from the group last year. He said bankers broadly accept that climate and nature-related risks must be addressed and that destroying nature undermines the core on which economies depend.
