The European Central Bank (ECB) has warned about the risk of climate change to financial stability and monetary policy.
“(It) is quite clear that climate change will have — and has — an impact on price stability, if you look at climate events, if you look at exposed areas in particular, price is based on that,” said President Christine Lagarde of the European Central Bank remotely at the State of the Union Conference CNBC reports.
The ECB undergoes a policy review of all aspects of its monetary policy and also considers the risk of climate change in a report.
“The space available for monetary policy will also be partly, not only but partly, determined by climate change,” Lagarde said.
Discussion on Climate
Lagarde joins an increasing number of leaders who are focusing on the potential financial risks associated with climate change. The managing director of the International Monetary Fund, Kristalina Georgieva, for example, recently warned of the negative consequences of the rising frequency of natural disasters.
“When a country has a natural climate disaster — and those disasters are getting frequent and severe — property is affected, agricultural production capacity and industry are affected, including financial institutions are hit,” Georgieva said to the CNBC, adding that natural climate disasters could cause mortgage owners problems, and reduce bank income on a climate regular basis.
Company assessment may also be affected by our transition to a low carbon economy.
“When we switch from high to low climate-carbon intensity industries in this high-intensity area are less valuable, changes in asset valuation can be quite difficult for financial institutions if this shift is abrupt,” Georgieva added.
