Climate change is one of the most pressing issues of our time. Not only does it affect our everyday lives, but also companies, investors, and policymakers have to take its consequences and costs into account. In a SAFE-CEPR Policy Web Seminar on 6 October 2022, Paul Hiebert, Stephan Fahr, Katarzyna Budnik, and Michael Grill, all economists at the European Central Bank (ECB), presented the ECB’s and European Systemic Risk Board’s report “The Macroprudential Challenge of Climate Change” from July 2022. By establishing a connection between visible outcomes of climate change, such as droughts, floods, and melting glaciers on the one hand, and implied effects on the social, political, and financial systems on the other, the report closely examines the substantial threat of lasting changes in the environment to financial stability.
Moderated by SAFE Director Jan Pieter Krahnen, Hiebert introduced the report and outlined that climate-related risks affect the entire financial system. The joint report provides insight into the impact of these risks on the European Union’s financial stability. “Our report links climate vulnerability to standard financial risk measurement and gauges implications for systemic risk,” Hiebert argued. He added that the report spans the cross-sectional and the time series dimensions of financial stability and thus could be integrated into macroprudential policy measures.
