Claudia Buch: Working together for climate neutrality - what role do stable banks play?

Speech by Prof Claudia Buch, Chair of the Supervisory Board of the European Central Bank, at ''the Week of the Environment", Berlin, 4 June 2024. 

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
05 June 2024

Thank you very much for inviting me to the opening of the seventh Week of the Environment. I am delighted to talk today about the significance of climate-related and environmental risks for the stability of the economy and the financial system – a very important topic for us at the European Central Bank.

Because climate change and nature degradation are everywhere. They are palpable, hold major risks and cause massive damage to the economy. Not just in the distant future but here and now, right on our doorstep.

Floods, droughts and heatwaves have already caused considerable financial damage in the Europe. Studies show that, if nothing is done, global heating in the period up to 2050 could lead to a loss in global economic output of several percentage points per year. The loss of biodiversity would also have considerable economic costs.

We need to protect our climate and environment today if we are to live in a secure and stable world tomorrow. Climate protection and biodiversity are a necessity if people and firms are to be able to plan with confidence for their future – without worrying that their livelihoods and businesses are endangered.

Climate-related and environmental risks also affect the banking sector.

Because banks are an important bridge to the future. Their loans reflect the economic structures of the past – for example loans made to companies with high carbon dioxide emissions. Banks can at the same time help to shape the future by making new loans, for example to producers of renewable energy. Such financing is important, as by 2030 carbon dioxide emissions in Europe have to be cut by 55%. That will require investment.