Fast and chaotic changes in the energy sector can create a serious financial threat to Europe’s largest banks, Bloomberg writes.
Investment and loans 11 key European Union banks in fossil fuel-related sectors reaches 532 billion euros (648 billion dollars). This is equivalent to 95 percent of their total basic capital of the first level – the key indicator of the financial sustainability of banks, is evidenced by the report of researchers of the Rousseau Institute, French Division “Earth’s Friends” and the non-commercial organization Reclaim Finance.
However, against the background of actual changes in the economy dictated by concern for ecology, these assets may depreciate.
Oil, gas and coal mining, actively going from the beginning of the industrial revolution, led to a record level of carbon dioxide emissions. To avoid the catastrophic consequences of climate change and perform the goals of the Paris Agreement to limit the level of global warming, emissions to the atmosphere will need to be reduced by half to the end of the decade and completely eliminate by 2050.
“The depreciation of assets related to the extraction of fossil fuel, the depreciation of the assets associated with the extraction of fossil fuel, can lead to a significant turbulence or even provoke a new financial crisis,” the researchers say.
With a serious pressure against the background of the transition to the Green Economy, the largest oil companies in the world are already facing. Thus, on June 9, shell agreed to reduce emissions by the court decision, although the company has declared the “uselessness” of such measures.
At the same time, not only the transition to the green economy can be posed for banks, but also the climate change themselves. In early June, the Acting Chapter Department of the US Cash Control Controller, Michael HSU, indicated that the risks associated with this will ultimately have to be taken into account in banking capital requirements. According to experts, the assets of financial institutions may be under threat, including because of such physical threats as a rise in sea level.