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Irene Heemskerk

Counsel to the Executive Board

Current Position: Senior Adviser
Fields of interest: Macroeconomics and Monetary Economics
Email: Irene.Heemskerk@ecb.europa.eu

Biography

ECB publications

2 December 2025

OCCASIONAL PAPER SERIES - No. 380

Nature at risk: Implications for the euro area economy and financial stability

English

Abstract: Degraded ecosystems undermine productivity, disrupt supply chains and heighten vulnerability to shocks, creating risks for the real economy and the financial sector. Biodiversity loss and ecosystem degradation also pose a growing risk to price stability, with increasing evidence that ecosystem shocks contribute to inflationary pressures in the euro area. This paper moves from dependency mapping to a risk-based assessment of the euro area economy and banks, applying the nature value-at-risk (NVaR) framework, which links biophysical shocks to ecosystem services with sectoral-production functions1. Water-related risks, including flood protection, surface water and groundwater scarcity, and water quality, emerge as the most material for the euro area economy. Surface-water scarcity alone could expose up to 24% of euro area output to risk under a drought event with a 100-year return period. A complementary endogenous-risk analysis that was conducted, quantified the extent to which euro area firms and banks may contribute to the very ecosystem degradation on which their activities depend, creating feedback loops that could amplify financial risks over time. The results showed material feedback loops between ecosystem degradation and banks’ own portfolios, with water-related risks being the dominant transmission channel. Overall, this study takes a first step towards the identification of risk hotspots and provides a more robust assessment of nature-related risks than prior studies. It also discusses the remaining data gaps and methodological constraints, and outlines the next steps to be taken, as a priority, to address this.
JEL Code: Q51 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Valuation of Environmental Effects
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
E31 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Price Level, Inflation, Deflation

23 May 2025

THE ECB BLOG

The European economy is not drought-proof

English

JEL Code: Q50 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→General

1 December 2023

OCCASIONAL PAPER SERIES - No. 335

The impact of the euro area economy and banks on biodiversity

English

Abstract: Biodiversity – the variety of life on Earth – is essential for sustaining the healthy ecosystems that our economy and banks depend on. Despite the clear benefits of a healthy natural world for people and the economy, humanity is putting immense pressure on nature and biodiversity. Economic activities that rely on healthy nature are often responsible for generating environmental pressures. It is important to assess the impact that firms and financial institutions have on nature degradation, in order to reveal their exposure to transition risk and highlight the need to move towards an economic system that values nature, rather than putting it at risk. This study analyses the contribution of euro area economic activities – and the bank loans provided to enable them – to biodiversity loss by estimating biodiversity footprints. The datasets we use account for approximately €4.3 trillion in corporate loans to around 4.2 million companies located in the euro area, issued by more than 2,500 unique consolidated euro area banks. Considering two primary drivers of biodiversity loss (land-use change and climate change), the results show that the economy has had a significant impact on biodiversity, equivalent to the loss of 582 million hectares of “pristine” natural areas worldwide. Even though the impact on biodiversity is highest in Europe, the supply chains of companies are important determinants of their indirect biodiversity footprint worldwide. Asia and Africa have the largest areas impacted by activities that take place in company supply chains. Additionally, financing of economic activities with a high global impact on nature is concentrated: the ten banks with the highest financing share are responsible for financing around 40% of the total global impact of euro area firms. [...]
JEL Code: C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
Q5 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics

8 November 2023

OCCASIONAL PAPER SERIES - No. 333

Living in a world of disappearing nature: physical risk and the implications for financial stability

English

Abstract: The loss of biodiversity and the degradation of natural ecosystems pose a significant threat to the broader economy and financial stability that central banks and financial supervisors cannot ignore. To gain further insights into the implications of nature and ecosystem service degradation for financial stability, this study assesses the dependencies of euro area non-financial corporations and banks on different ecosystem services. The study then develops a method to capture banks’ credit portfolio sensitivity to possible future changes in the provision of ecosystem services. Our results show that 75% of all corporate loan exposures in the euro area have a strong dependency on at least one ecosystem service. We also find that loan portfolios may be significantly affected if nature degradation continues its current trend, with greater vulnerabilities concentrated in certain regions and economic sectors.
JEL Code: C55 : Mathematical and Quantitative Methods→Econometric Modeling→Modeling with Large Data Sets?
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
Q5 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics

9 November 2022