ECB stress testing broader economy over climate risk: de Guindos

FILE PHOTO: Vice-President of the European Central Bank (ECB) Luis de Guindos gives a statement during the second day of the Informal Meeting of EU Ministers for Economics and Financial Affairs in Berlin, Germany September 12, 2020. Odd Andersen/Pool via REUTERS

FRANKFURT (Reuters) - The European Central Bank is stress testing the broader economy to assess the economic risk of climate change three decades into the future, the bank’s vice president said on Thursday.

While full results of the test, which includes four million companies worldwide and almost all euro zone banks, will be published in mid-2021, early results show there is a clear benefit to early action, Luis de Guindos said.

“The biggest polluting firms, together with those in regions that are the most vulnerable to physical risk, could be exposed to up to four times as much climate risk as the average firm over the next 30 years,” de Guindos said in a blog post.

“In the absence of further climate policies, the costs to companies arising from extreme weather events rise substantially, and greatly increase their probability of default.”

Reporting by Balazs Koranyi; editing by Jason Neely