How does the ECB assess physical climate risks?

The ECB analyses what share of bank loans and financial assets has been lent to companies in climate-exposed areas. To do so it uses geospatial data on flooding, drought, heat and other natural hazards and compares them with the locations of borrowers.

Which climate risks are largest for Germany?

Fluvial flooding causes the highest expected losses in the German bank-loan portfolio (over €3bn/year gross). Water stress and changing precipitation patterns affect almost the entire portfolio in terms of area.

Climate risk: physical hazards & financial portfolios

Q: What do NEAR and CEAR mean?

NEAR (Normalised Exposure at Risk) is the expected gross loss — i.e. the damage before insurance or collateral. CEAR (Collateral-Adjusted Exposure at Risk) is the net loss after deducting collateral. The difference shows how much insurance and flood protection reduce the actual loss.

The ECB analyses how strongly bank loans and financial assets are threatened by physical climate risks. Here you find current data on exposure and expected losses in the euro area.

Flood exposure DE

16.3% of bank loans exposed

Fluvial flooding, current

Source: EZB

Critical water stress DE

27.2% in the highest risk tier

Score 3 (critical)

Source: EZB

Flood losses DE

3,328€m / year (gross)

Expected loss, bank loans

Source: EZB

Risk increase (worst case)

+1.9pp more exposed by 2100

RCP 8.5 vs. today

Source: EZB

The ECB assesses what share of bank loans has been extended to companies in climate-exposed areas. "Gross loss" = estimated damage without insurance. "Net loss" = after deducting collateral. Data as of December 2024.

Climate hazards for bank loans (DE)

Affected share (score ≥ 1) vs. critical risk tier (score 3). Source: ECB

Expected losses DE (€m/year)

Gross loss (before insurance) vs. net loss (after collateral). Source: ECB

What do NEAR and CEAR mean?

NEAR – gross loss

The expected annual damage without accounting for insurance or collateral. Shows the full damage potential of a natural hazard.

CEAR – net loss

The expected loss after deducting collateral, insurance and flood protection. Usually 60–70 % below the gross loss.

iThe difference between NEAR and CEAR shows how strongly existing protections reduce the actual loss for banks.

Climate-risk prevention – ROI 2.5–6.3x

Prevention is among the most economic investments there are. Guide values for typical German commercial sites.

Risk type	ROI	Investment	Avoided damage	Measure	Climate trend
Heavy rain / flooding	6x Payback in <1 event	€2,000–6,000	€660m/year	Backflow protection, drainage	Rising R20 events
Heat stress (staff)	2,5x Payback 2–3 summers	€30–90/m²	3–12 % productivity loss	Split air-con / shading	35 to 78 heat days (SSP5-8.5)
Flood (site)	6,3x Payback in <1 event	€200–500/linear m	€380,000 Ø	Mobile barrier / stop logs	Rising extreme events

ROIØ 5x return – prevention is cheaper than damage remediation. Insurers and banks increasingly factor climate resilience into premiums and conditions.

ECB stress tests account for climate risks

The ECB integrates physical climate risks into its bank stress tests. Fluvial flooding is Germany's single largest hazard — with expected annual gross losses of over €3bn in the bank-loan portfolio alone. Collateral and insurance reduce the net loss to approximately €1.1bn. Under unmitigated emissions (RCP 8.5), losses rise by 2100 to €3.6bn gross.

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