Climate Crisis Threatens Global Financial Stability

Frank Elderson, a senior European Central Bank (ECB) official, has warned that the climate crisis poses a significant threat to global financial stability. The central bank is increasing its monitoring of financial risks linked to the destruction of 'ecosystem services,' which support human activity.

Ecosystem services refer to the benefits provided by natural systems and processes, such as water serving as a raw material or source of energy through hydropower. Natural systems also provide habitats for marine life essential for food production and support recreational activities.

Nature-related risks can entail substantial economic and financial risks, including impacts on credit risk, growth, inflation, and potential financial instability over the longer term, according to Elderson.