Climate-related risks to financial stability

Spyros Alogoskoufis, Sante Carbone, Wouter Coussens, Stephan Fahr, Margherita Giuzio, Friderike Kuik, Laura Parisi, Dilyara Salakhova and Martina Spaggiari

Financial Stability Review, 2021, vol. 1

Abstract: The ECB has been intensifying its quantitative work aimed at capturing climate-related risks to financial stability. This includes estimating financial system exposures to climate-related risks, upgrading banking sector scenario analysis and monitoring developments in the financing of the green transition. Considerable progress has been made on capturing banking sector exposures to firms that are subject to physical risks from climate change. While data and methodological challenges are still a focus of ongoing debates, our analyses suggest (i) somewhat concentrated bank exposures to physical and transition risk drivers, (ii) a prevalence of exposures amongst more vulnerable banks and in specific regions, (iii) risk-mitigating potential for interactions across financial institutions, and (iv) strong inter-temporal dependency conditioning the interaction of transition and physical risks. At the same time, investor interest in “green finance” continues to grow – but so-called greenwashing concerns need to be addressed to foster efficient market mechanisms. Both the assessment of risks and the allocation of finance to support the orderly transition to a more sustainable economy can benefit from enhanced disclosures, including of firms’ forward-looking emission targets, better data and strengthened risk assessment methodologies, among other things. JEL Classification: G10, G18, G20, Q54

Keywords: banks; Climate change; climate policies; financial stability; green finance; non-banks (search for similar items in EconPapers)
Date: 2021-05
Note: 1056838
References: Add references at CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.ecb.europa.eu//pub/financial-stability ... 2~d05518fc6b.en.html (text/html)

Related works:
Journal Article: Climate-related risks to financial stability (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:fsrart:2021:0001:2

Access Statistics for this article

More articles in Financial Stability Review from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().