European Central Bank (ECB) has announced that it is conducting economy-wide stress tests on the impact of climate change on four million companies worldwide and 2,000 banks across a 30-year timeline. This comprehensive exercise – the first of its kind – aims to assess the exposure of euro area banks to future climate risks by analysing the resilience of their counterparties under various climate scenarios. According to ECB vice-president, Luis de Guindos, this is a vital step forward in the quest for knowledge on the impact climate risks have on economic and financial stability, which until now has been poorly identified, quantified and understood.
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