(Bloomberg) -- The European Central Bank must account for risks stemming from damage to nature, a process that could feed inflation in the same way that climate change does, according to Executive Board member Frank Elderson.
“If nature degradation continues, economic activities dependent on ecosystem services will be affected by issues such as supply-chain disruptions, which have an impact on prices and ultimately on inflation,” Elderson said Tuesday in a speech.
Talking at Euro Finance Week in Frankfurt, he said nature degradation and climate change are both relevant to the ECB’s mandate to ensure price stability across the 20-nation euro zone.
The Dutch official, who’s also vice-chair of the ECB’s Supervisory Board, has repeatedly warned that environmental challenges will stoke economic volatility. His remarks come amid a fresh review of the ECB’s monetary-policy strategy, with results due in the second half of 2025.
“The ECB’s upcoming assessment of the monetary-policy strategy provides an opportunity to confirm the relevance of nature degradation and climate change for monetary policy in the euro area,” Elderson said.
The last review, which ended in 2021, brought a climate action plan covering macroeconomic modeling, financial-stability monitoring, data collection, risk-assessment capabilities and the ECB’s monetary-policy operations.
©2024 Bloomberg L.P.