A Central Banker Says Wildfires and Dying Ecosystems Are Now a Threat to Your Bank
ECB executive board member Frank Elderson warns nature loss and climate extremes are becoming a financial stability risk, not just an environmental one
By Barnaby "Bottom-Line" Coyne
Forget the usual suspects — bad loans, bond crashes, bank runs. A senior official at the European Central Bank says the next threat to financial stability might be a burning forest or a collapsing fishery.
Frank Elderson, a member of the ECB's executive board, told the Guardian that the climate emergency and the broader breakdown of nature pose a 'dramatically growing' risk to the global economy. As wildfires rage across parts of Europe this summer, Elderson said the eurozone's lender of last resort is stepping up its monitoring of financial risks tied to the destruction of what he calls 'ecosystem services' — the nature-based processes, like pollination, clean water, and stable soil, that prop up entire industries most people never think about.
This is not tree-hugging talk from a central bank. It's a warning that insurers, farmers, food producers, and the banks that lend to them could all take a hit if the natural systems underpinning their business models keep failing at the pace they have this summer. The ECB's job is to keep the financial system from cracking; Elderson's comments suggest the bank now sees wildfire smoke and vanishing ecosystems as line items on that ledger, alongside interest rates and bad debt.
Elderson said more work is needed to properly assess how much risk is actually baked into the system — a striking admission that, even at the institutional level responsible for eurozone financial stability, nobody yet has a firm number on the exposure.
That uncertainty is itself worth sitting with. If the people whose job is to measure risk say they can't yet measure this one, the rest of us should probably take the warning seriously rather than wait for the invoice.
Somebody's paying for this. Let's find out who.
— Compiled from reporting by The Guardian.
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