No. 949 - Euro-area physical risk indicators for climate-related financial stability analyses
Climate change-related physical risks refer to the possibility that extreme weather events may damage assets and people, with consequent economic and social impacts. This paper examines the indicators developed by the ECB regarding the exposure of financial intermediaries to physical risks. The analysis compares the Italian indicators with those related to other euro-area countries, with a focus on the risks of wildfires, floods, droughts, and water stress.
Forward-looking indicators show an increase in physical risks. Current flood defences, together with the presence of collateral, limit expected losses for intermediaries in the euro area, but they may become less effective in the future. The exposure of the Italian financial system to drought and flood risks is in line with that of other euro-area countries; however, its exposure to water stress and wildfire risks is higher.
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