Extreme weather could cause 5% drop in eurozone GDP, bank watchdogs find
A series of severe weather-related events could cause an almost 5% near-term drop in eurozone growth, based on the most extreme climate scenario devised by a group of more than 140 bank supervisors and regulators earlier this year, according to Livio Stracca, deputy director-general at the ECB.
'The peak negative effect on euro area GDP is almost 5%, which is the same order of magnitude as what we have seen in the global financial crisis and a little bit less than Covid-19,' said Stracca, who also chairs the Network for Greening the Financial System's workstream on scenario design and analysis.
The findings are based on a new set of tools designed by the NGFS, a group of central bankers and supervisors working to address climate-risk in the financial sector and economy.
The tools aim to help banks and companies understand how climate change may impact their businesses in the short term by testing out a series of climate-related scenarios.
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