the time horizon of the analysis ( three years ), these scenarios seek to calibrate the initial cost to the spanish economy of the transition to a green productive model. the results show that the cost of applying these policies in terms of economic activity would be moderate over the first three years, although highly uneven across sectors. also, according to this exercise, the spanish banking sector could absorb the impact of the increase in costs of productive sectors that would be generated by an ambitious climate transition policy, without significant impairment of its solvency. at the same time, as i have already said, we are working to measure the costs of failing to act on climate change. in this respect, certain episodes have already been observed that enable this cost to be approximated to some extent. one of these episodes – the degradation of the mar menor – has been analysed by our economists. 18 using econometric exercises, they estimated that the ecological deterioration has already had a significant negative impact on the value of housing in the areas affected ; in cumulative terms, house prices have risen by approximately 40 % less than in comparable areas that have not suffered a similar impact. for the banking sector, the loss of value of residential housing obviously entails a lower value of the available collateral and increased risk in the event of impairment of the loan portfolio, and especially of mortgage loans. more generally, this exercise shows that the materialisation of climate change may have a significant impact on the economy as a whole. conclusions to conclude. i have referred today to various initiatives that show that we financial regulators and supervisors, within our mandates to guarantee financial stability, can ( and should ) actively contribute to international action to combat climate change. to ensure that the relative prices of financial instruments change, and thus to help internalise the consequences of climate change, it is essential that financial market players identify climate risk factors and their transmission channels, measuring their economic and financial impact appropriately, and that they disclose their exposure to these risk factors and define and develop possible measures to mitigate and reduce them. this is necessary to supplement the fiscal and environmental instruments required to achieve the environmental targets. allow me to finish by emphasising the global nature of this strategy. climate change is a phenomenon that affects the whole planet. globally coordinated action is needed to address it, including, of course, in the financial sphere. this is the perspective that informs the banco de espana ’ s firm commitment to do its utmost to contribute, within the scope of its responsibilities, to

an alternative scenario involves an orderly transition, in which the measures necessary to reduce the volume of co2 emissions in accordance with the paris agreement are taken promptly and progressively. as the measures are introduced gradually, the physical and transition risks are considerably reduced. disorderly transition is a third scenario, under which measures to combat climate change are not taken until a relatively late stage, so that it is necessary to reduce emissions to a greater extent than under the orderly transition scenario in order to achieve the same emission reduction target. as a result, the transition risks increase. a growing number of central banks and financial supervisors have begun to carry out climate change stress tests, making use of these scenarios, adapted as necessary to reflect the specific features of each economy. in september 2021, the results of the ecb ’ s stress tests were published. they covered approximately 4 million companies worldwide and 1, 600 consolidated banking groups in the euro area and incorporated the impact of both physical and transition risks over a 30year period. the results show that the long - term benefits of early adoption of policies boosting the transition to a carbon - free economy more than offset the short - term costs of this transition. they also show that if climate change is not mitigated, the materialisation of the physical risks will generate large economic losses, which would be greater in certain geographical areas, with particularly significant effects on banks exposed to these areas. climate - related financial risks – measurement methodologies, bcbs, april 2021. in terms of their impact on economic activity, the differences between these scenarios are considerable. the short - term cost, in terms of gdp, of measures to mitigate climate change will be greater the later they are implemented. even so, by the end of the time horizon of the exercise, gdp would be approximately three percentage points lower under the disorderly transition scenario than under the orderly transition scenario, and six percentage points lower under the scenario of no significant measures. these impacts on economic activity lead to a deterioration in the financial situation of businesses and, consequently, in their ability to pay their bank debts. also, the materialisation of climate risks impairs the quality of bank collateral and increases the losses in the event of default. given these results, the ecb estimates that the expected losses for the banking sector arising from the impairment of the credit quality of its counterparties and collateral would amount to approximately 3. 5 % and 8 % in 2050 under the disorderly transition and measure - free scenarios, respectively. european