ECB’s Elderson: ‘Climate-Related Risk Is Still Underpriced’

23 September 2024

By Isabel Teles – FRANKFURT (Econostream) – European Central Bank Executive Board member Frank Elderson on Monday said that it was important to improve initiatives to integrate climate-related risk drivers into credit risk management.

In remarks at the ECB Summit in Frankfurt, the text of which was posted to the website of the ECB, Elderson said that while there was evidence that an average bank took climate-related risks into account by offering more expensive loans in high-risk areas, ‘the effect we find is economically small, so it seems that the climate-related risk is still underpriced by the average bank.’

Good risk-management demanded a deep comprehension of the risks, which required good data, he said.

‘The same holds true when integrating climate-related risk drivers into credit risk management’, he said.

In that context, all efforts to improve data availability were welcome, he said, as were the strategies that banks have implemented to address data gaps.

‘To succeed in our common goal of making banks resilient to climate and nature-related risks, it is vital that we keep up this dialogue with you – the industry – and encourage the exchange of good practices in the years to come’, he said.