A senior official at the European Central Bank (ECB) has warned that climate change and the loss of natural ecosystems are becoming major risks to the global economy and financial system. Frank Elderson, a member of the ECB's executive board, said the decline of nature-related resources and services could have serious consequences for banks, businesses, and economic growth. He stressed that these risks are no longer environmental concerns alone but are now important financial issues. The warning comes as parts of Europe face severe wildfires and extreme heat. Countries including France and Spain have experienced large fires that damaged homes, businesses, and natural areas. Experts say these events are becoming more common as global temperatures rise. Elderson said the increasing number of climate-related disasters creates growing pressure on financial stability. He explained that central banks and financial institutions must better understand how environmental damage can affect economies over the long term. One of the ECB’s key concerns is the decline of ecosystem services. These services include natural processes and resources that support human activity and economic production. Examples include clean water, fertile soil, forests, pollination, and natural habitats that help support agriculture, energy production, transportation, and food supplies. Many industries depend on these resources to operate effectively. According to Elderson, these ecosystem services are deteriorating at a rapid pace. As a result, banks and regulators need to understand how businesses depend on nature and how environmental damage could affect their financial performance. He said the ECB has already begun increasing its monitoring of risks connected to ecosystem degradation. The bank is studying how environmental decline could impact lending, investment, and financial markets across the eurozone. Elderson noted that assessing nature-related risks is more complex than measuring the impact of a single weather event. While a flood or wildfire may cause immediate losses, the gradual decline of ecosystems can create long-term economic challenges that are harder to track. The ECB believes these risks can affect several key areas of the economy. These include credit risk, economic growth, inflation, and overall financial stability. Credit risk may increase if businesses that rely heavily on natural resources face financial difficulties. Economic growth could slow if environmental damage reduces productivity in important sectors such as agriculture, energy, and manufacturing. Inflation may also be affected if shortages of resources lead to higher prices. Over time, these pressures could create broader challenges for financial systems and economic stability. Elderson emphasized that the issue should be viewed as a core economic concern rather than a purely environmental debate. He said economies depend on healthy ecosystems and natural resources. If those systems continue to weaken, businesses and financial institutions may face growing risks that cannot be ignored. As part of its efforts, the ECB has launched a program to examine how environmental degradation could affect Europe's banking sector. The central bank plans to publish new research later this year. The analysis will explore how different ecosystem degradation scenarios could lead to credit losses for banks across the eurozone. Officials hope the findings will help financial institutions better manage future risks. The ECB has been among the leading global central banks addressing climate-related financial challenges. Elderson played a key role in establishing the Network for Greening the Financial System (NGFS) in 2017. The international group brings together central banks and financial supervisors from around the world to improve climate risk management and strengthen financial resilience. Despite growing support for climate risk monitoring in Europe, some financial and political leaders have pushed back against environmental policies. The debate has become more visible in recent years as governments and businesses balance economic growth with climate goals. The United States withdrew from the NGFS during President Donald Trump's administration, reducing American involvement in the international initiative. As a result, European institutions have continued much of the leadership on climate-related financial risk assessments. Even with political differences, Elderson said European banks broadly recognize the importance of addressing climate and nature-related risks. He noted that most major financial institutions now understand that environmental challenges can directly affect business performance and economic stability. According to the ECB official, climate and nature risks have become an important part of modern financial management and long-term economic planning.