LinkedIn·Tuesday, 7 July 2026·07 Jul 2026
Stress testing only works if you're stressing the right things. The ECB believes climate and nature-related risks still aren't being fully…
Chris Puype
CEO & Founder ElysianNxt
Stress testing only works if you're stressing the right things.
The ECB believes climate and nature-related risks still aren't being fully captured by many banks.
According to ECB Vice-Chair Frank Elderson, physical and nature-related risks are "very likely being underestimated", despite significant progress in recent years.
That's not entirely surprising.
Nature risk, biodiversity loss, extreme weather, and long-term transition pathways are all difficult to quantify. Many banks are still building the data, models, and governance frameworks needed to assess them properly.
The ECB's latest guidance places significant emphasis on preparedness and scenario analysis.
Banks need to understand not only their current risk profile, but also how different transition scenarios could reshape that profile over time.
When uncertainty is high, the ability to explore different futures becomes a risk management capability in its own right.
ECB: Climate, Nature Risks “Very Likely Being Underestimated" by Banks - ESG Today
https://www.esgtoday.com/ecb-climate-nature-risks-very-likely-being-underestimated-by-banks/
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