ECB warns extreme water scarcity puts up to 24% of eurozone output at risk

The European Central Bank (ECB) warned on Monday that an extreme water scarcity event could put up to 24% of euro area economic output at risk of loss.

ECB research showed that 72% of companies in the eurozone are highly dependent on ecosystem services, while nearly 75% of bank corporate lending goes to firms exposed to at least one ecosystem service.

The central bank estimated that meeting EU objectives will require additional green investment of around 3% of the bloc's gross domestic product annually until 2030.

Estimates indicate that the public sector will cover 20% to 25% of total green investment needs, leaving the vast majority to be financed by private capital.

Highlighting physical shocks in 2026, the report noted that low water levels on the river Rhine in July shaved roughly 0.2 percentage points off German third-quarter real GDP growth.

The ECB also warned of a widening insurance protection gap, noting that less than one-quarter of natural catastrophe losses in the EU are insured, with coverage falling below 5% in several member countries.

Between 1981 and 2023, extreme weather disasters caused around €900 billion ($1.01 trillion) in direct economic losses across the bloc, with more than one-fifth occurring in the last three years.

Internally, the central bank reduced its carbon dioxide emissions by 46% in 2025 compared with 2019 levels and integrated factors into its Eurosystem collateral framework for marketable corporate assets this year.