Núñez warns of escalating climate risks to financial stability

The global context makes work on climate risks more urgent than ever, with climate change shaping economic and financial conditions.

Physical risks from extreme weather events are sharply increasing, while transition risks grow more complex due to evolving regulation, technological shifts, and transparency expectations.

These events generate mounting economic and financial costs, translating into higher credit risk, increased insurance liabilities, and fiscal pressures that weaken sovereign creditworthiness, thereby heightening systemic risk.

The October 2024 DANA in Valencia, Spain, caused severe local losses for households and firms.

Despite this, the Banco de España concluded its overall impact on Spain's broader economy and financial stability was non-systemic, thanks to limited exposed credit and public mitigating measures.

Recognizing this heterogeneity is crucial for designing targeted adaptation policies and financial stability frameworks that account for regional disparities and country-specific vulnerabilities.

Strengthening the climate agenda is essential for boosting competitiveness and resilience.

Central banks and supervisors must ensure financial system resilience by deepening their understanding of climate risk propagation and interaction with macroeconomic trends.

Advancing knowledge, data, and analytical tools for climate risk assessment is crucial for fulfilling mandates, encompassing nature and biodiversity loss.

Reliable, comparable, and granular climate data forms the foundation for rigorous assessment and informed policymaking.

Integrating climate considerations into central bank portfolios offers a concrete opportunity to lead by example.

Collaboration across institutions, sectors, and jurisdictions is paramount, as no single entity can address these challenges alone.

The Network for Greening the Financial System emphasizes that the cost of inaction far exceeds the cost of an orderly transition.