A senior European Central Bank official has warned that the climate crisis and the degradation of nature are becoming major threats to financial stability. Frank Elderson said increasingly frequent disasters, such as the wildfires affecting France and Spain, can damage homes, businesses and economies, while the decline of natural systems creates broader and harder-to-measure risks for banks.

The ECB is expanding its work on “ecosystem services” such as water, food-producing habitats and natural processes that underpin economic activity. It plans to publish analysis later this year on how environmental degradation could lead to credit losses for eurozone banks; Elderson said the risks could affect growth, inflation, creditworthiness and long-term stability. He helped found the Network for Greening the Financial System in 2017, though the US withdrew from it under Donald Trump last year.