Speaking at the Green Swan 2026 Conference in Manila, ECB Executive Board Member Frank Elderson emphasized that climate and nature-related shocks are no longer external environmental issues but are embedded within the economy as macroeconomic concerns. Elderson noted that the summer of 2026 was the warmest ever recorded in Western Europe, characterized by severe droughts, wildfires, and water scarcity that disrupted transport, industry, and energy production.
Recent ECB research highlights the scale of these vulnerabilities, suggesting that severe water scarcity could put up to 24% of the euro area’s economic output at risk. Elderson pointed out that climate shocks increasingly influence inflation dynamics; for instance, low water levels in 2026 contributed to higher wholesale electricity prices and influenced food price volatility. He argued that because these risks affect productivity, growth, and financial stability, addressing them falls squarely within the ECB's mandate.
Elderson distinguished between adaptation, which addresses the consequences of climate change, and mitigation, which addresses the causes. He stressed that while adaptation is a necessity for maintaining economic resilience and competitiveness, it cannot replace mitigation. Without effective mitigation, the scale and cost of required adaptation will become progressively larger and more difficult to manage.
Regarding the green transition, Elderson challenged the perception that resilience, energy security, and competitiveness are competing objectives. He argued that resilience and energy security are becoming preconditions for competitiveness, as firms cannot remain competitive if their operations are vulnerable to increasing climate shocks. He noted that transitioning to renewable energy can reduce Europe's dependency on imported fossil fuels, thereby mitigating geopolitical vulnerabilities.
Finally, the ECB official called for enhanced international cooperation to address these shared risks, particularly in a period of increasing geopolitical fragmentation. He advocated for the integration of climate and nature risks into macroeconomic models and forecasting procedures to better identify vulnerabilities and strengthen the resilience of the financial system.