The BEA has published the results of its economy-wide stress test, which tested the impact of climate change on over 4 million firms worldwide and 1,600 euro area banks. The findings show that:
- firms and banks are to be severely affected if climate change issues not addressed;
- orderly and swift transition to minimise costs and maximise benefits outweighs short-term cost of transition to zero-carbon economy over medium to longer term; and
- investment in sectors and regions heavily exposed to climate risk set to suffer most.
The results and methodology of the stress test will inform the 2022 supervisory climate stress test for the banks that the ECB directly supervises.