Frank Elderson authored a groundbreaking 2023 report from the European Central Bank that found the majority of EU companies and banks will incur significant financial risk if natural ecosystems collapse due to climate change and biodiversity loss. These findings helped strengthen the business case for Europe’s landmark Nature Restoration Law, which came into effect in August.
What is the single most important action you think the public, or a specific company or government (other than your own), needs to take in the next year to advance the climate agenda?
Companies, banks, and policymakers need to future-proof themselves as our economy transitions towards meeting climate and nature goals. They need to manage the risks from the climate and nature crises and the green transition. The best way to achieve this vitally important goal is through credible and reliable transition planning. Transition plans make the path to climate neutrality orderly and predictable, marking it out with clear, measurable milestones and helping governments, businesses, and banks plan ahead and stay on track. Rigorous transition planning transforms a daunting task into concrete, manageable and, crucially, enforceable steps. And it is particularly urgent because, at the European Central Bank, our analysis shows that investing in the transition now will significantly reduce the risks and costs for households and firms later.
What’s one sustainability effort you personally will try to adopt in the next year, and why?
At the ECB, as part of our multi-year agenda for banking supervision, we will take further steps to make sure that the banks we supervise directly – which have total assets of over €26 trillion – fully account for climate and nature-related risks in their strategies and risk management. Banks that do not will receive binding requirements and could face penalty payments. Supervisors can no longer allow banks to fail to account for the risks of the unfolding climate and nature crises. The ECB does not accept this and will actively enforce compliance.
If you could stand up and talk to world leaders at the next U.N. climate conference, what would you say?
If you destroy nature, you destroy the economy. Global finance needs nature to survive. Our analysis shows that the economy depends critically on nature: Seventy-two percent of non-financial businesses in the euro area would experience significant economic problems as a result of ecosystem degradation because of their dependence on ecosystem services. If these businesses run into trouble, so will the banks that finance them. International standard-setting bodies therefore need to ensure that climate and nature-related considerations are fully reflected in regulation and supervision.
More Must-Reads from TIME
- How Donald Trump Won
- The Best Inventions of 2024
- Why Sleep Is the Key to Living Longer
- How to Break 8 Toxic Communication Habits
- Nicola Coughlan Bet on Herself—And Won
- What It’s Like to Have Long COVID As a Kid
- 22 Essential Works of Indigenous Cinema
- Meet TIME's Newest Class of Next Generation Leaders
Contact us at letters@time.com