A third of euro zone corporate loans exposed to climate hazards: ECB

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© Reuters. The headquarters of the (ECB) are seen during sunset as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany, March 26, 2021. REUTERS/Kai Pfaffenbach

FRANKFURT (Reuters) – Euro zone banks face potential climate hazards such as floods and droughts on up to a third of their loans to companies, with lenders in Greece, Portugal and among the most exposed, the European Central Bank said on Monday.

The ECB study is part of a broader analysis of the risks that poses to the financial sector, ranging from physical damage to changes in regulation or in consumer preferences.

It found that around 30% of euro area banks’ corporate loan book is exposed to businesses located in areas where the risk of floods, droughts, extreme heat, wildfires or a rise in sea levels is high or rising.

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“This may become increasingly relevant if are not effectively reduced in the long run and if firms and economies fail to adapt to climate change,” the ECB said.

With 18% of firms in Southern Europe highly or increasingly exposed to extreme heat, water scarcity or wildfires, banks in those countries emerged as the most exposed.

Some 80% of Greek banks and roughly 40% of Portuguese and Spanish banks were exposed to multiple risks, the ECB’s study showed.

While two-thirds of loans to areas at high or rising risks are secured by collateral, half of that is made up of physical assets — whose value is itself subject to those same hazards — in sectors such as manufacturing and

Only a third of climate-related in the euro area are insured, with that share falling as low as 12% in southern Europe, the ECB said citing Eurostat and NatCatSERVICE data.

Source: Investing.com

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