EU warned of rising risk of systemic financial shocks from continent warming

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The EU is at “higher and higher” risk of systemic financial shocks from climate change, the head of Europe’s environment agency has warned, as research showed the continent should prepare for temperatures at least 3C warmer than pre-industrial times by 2050.

“This is a wake-up call for the financial industry and the insurance industry,” executive director of the European Environment Agency Leena Ylä-Mononen told the Financial Times.

“It’s not that we face a major financial shock tomorrow but it is accumulating,” she said. “If we start talking about major investments in general into our infrastructure or if we make wrong choices in investing in the way we are constructing our society . . . the risks are getting higher and higher.”

Europe is the fastest-warming continent in the world, with temperatures rising at roughly twice the global rate. A long-term global average temperature rise of 1.5C from the pre-industrial era would correlate to 3C across Europe.

The impact of that could be dire, according to an EEA report published on Monday, which warns that without “decisive action”, “hundreds of thousands of people would die from heatwaves, and economic losses from coastal floods alone could exceed €1tn a year”.

Temperatures could rise by more than 7C by 2100, the report said.

Extreme weather risked causing “reduced tax revenues, increased government expenditure, lower credit ratings and increased cost of borrowing”, it added.

In a draft response to the EEA report, seen by the Financial Times, the European Commission said that it planned to set “minimum climate resilience requirements” for all spending under the next EU budget from 2027.

It would also establish a committee to plan strategies for financing adaptation measures.

The commission’s draft report, subject to change before its publication on Tuesday,…