A third of euro zone corporate loans exposed to climate hazards: ECB
Reuters
Published May 17, 2021 10:11AM ET
FRANKFURT (Reuters) - Euro zone banks face potential climate hazards such as floods and droughts on up to a third of their loans to companies, with lenders in Greece, Portugal and Spain among the most exposed, the European Central Bank said on Monday.
The ECB study is part of a broader analysis of the risks that climate change poses to the financial sector, ranging from physical damage to changes in regulation or in consumer preferences.
It found that around 30% of euro area banks' corporate loan book is exposed to businesses located in areas where the risk of floods, droughts, extreme heat, wildfires or a rise in sea levels is high or rising.
"This may become increasingly relevant if emissions are not effectively reduced in the long run and if firms and economies fail to adapt to climate change," the ECB said.
With 18% of firms in Southern Europe highly or increasingly exposed to extreme heat, water scarcity or wildfires, banks in those countries emerged as the most exposed.
Some 80% of Greek banks and roughly 40% of Portuguese and Spanish banks were exposed to multiple risks, the ECB's study showed.
While two-thirds of loans to areas at high or rising risks are secured by collateral, half of that is made up of physical assets -- whose value is itself subject to those same hazards -- in sectors such as manufacturing and real estate
Only a third of climate-related economic losses in the euro area are insured, with that share falling as low as 12% in southern Europe, the ECB said citing Eurostat and NatCatSERVICE data.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.