by Luis de Guindos, Vice-President of the ECB
Climate change is one of the greatest challenges facing humankind this century. If left unchecked, it is likely to result in more frequent and more severe climate events, causing widespread devastation and economic disruption. Substantial changes in our production, consumption and living habits are required if the world is to avert catastrophic climate change. However, the changes required may themselves disrupt the economy and the financial system.
While the primary responsibility for combating climate change lies with governments, central banks can play an important contributory role. They can help ensure that the financial system is resilient to the transition to a low-carbon economy, by providing more and better information to market participants on the risks from climate change. Stress tests can be an important tool here, as they can cast a light on climate risks that currently still lurk in the darkness. […]
Link: Shining a light on climate risks: the ECB’s economy-wide climate stress test