Report
In its response to the European Commission’s consultation on an integrated climate resilience and risk management framework, Finance Watch calls for financial reforms to be a central part of the EU approach to climate resilience. It outlines the need to address climate change as a systemic risk to financial stability, public finances and long-term economic prosperity to be resilient.
In particular, Finance Watch explains why current risk management practices are insufficient, as they rely heavily on historical data and underestimate the scale, uncertainty and non-linear nature of climate risks. The response sets out the need for a precautionary and forward-looking approach here, including the full integration of climate risk into financial supervision and prudential regulation.
Finance Watch also emphasises the need for a common EU approach to climate risk assessment, based on shared climate scenarios and harmonised transition pathways, to avoid underestimating future losses and to ensure coordinated action across Member States. The importance of improved and consistent climate-related disclosures is highlighted as a precondition for sound investment decisions.
The response raises the point that closing Europe’s climate investment gap will require significant public investment. It calls for EU fiscal and economic governance to create sufficient fiscal space for mitigation and adaptation. It also highlights the need for climate risks to be properly reflected in fiscal planning and debt sustainability assessments.
Finally, the Finance Watch team also addresses the problem of the growing insurance protection gap in Europe. It discusses the potential role of a European catastrophe risk framework, while stressing that access to public support should be conditional on credible transition and adaptation efforts and accompanied by strong prevention standards.
