a case in point is the mar menor, the largest salt - water lagoon in europe, on the south - eastern coast of spain, in the region of murcia. the mar menor is also a major tourist hotspot, with 7, 500 beds in the surrounding area and annual visitor numbers historically exceeding the 200, 000 - mark. however, since the 1960s the mar menor ecosystem has come under increasing strain with the growth of agriculture and tourism. this ecological degradation is primarily the result of the expansion of the agricultural sector and agri - food industry in the vicinity of the lagoon, particularly since the shift from dry - farming to irrigated crops ( now accounting for more than 80 % of the total area ). this deteriorated environment, combined with frequent climate change - related flooding and extreme temperatures in the region ( as high as 47°c in august 2021 ), has been a key factor behind the changes in the nitrogen and phosphorus nutrient cycles, leading to eutrophication ( i. e. an increase in biomass in a body of water ), and the widespread growth of algal blooms in particular. this massive expansion of algae ( dubbed the “ green soup ” ) meant that light can no longer reach the bottom of the lagoon. the plants on the lake bed die off, leading to an increase in decomposition caused by bacteria, which use up the available oxygen, thus killing the fish. a banco de espana paper by lamas et al. ( 2023 ) 15 shows that property prices in the surrounding areas took a sizeable hit once the locals realised the scale of the environmental damage in the mar menor. this realisation, which dawned some time after the actual 13 see the 2023 repo rt o n climate change risks o f the spanish macro prudential autho rity ( amcesfi ). t his analysis is carried o ut by po o ling data fro m the natio nal flo o dplain mapping system, develo ped by the ministry fo r eco lo gical transitio n and demographic challenge ( miteco ), the land registry and the banco de espana ’ s central credit register. 14 there is no evidence to sho w that the lo an - to - value ( ltv ) ratio is higher in areas at greater risk o f flo oding. 15 “ impact o f climate risk materializatio n and eco lo gical deterio ratio n on house prices

in mar meno r, spain ” ( matias lamas, mari luz lo renzo, manuel medina and gabriel perez - quiro s ). scientific repo rts 13, 11772 ( 2023 ). damage had been done, was borne out by an increase in the number of negative tweets since 2015, as well as in the number of negative news reports on the mar menor. the return on housing investment was 43 % lower in the surroundings of mar menor than in comparable neighbouring zones in the period 2015 - 2021, a period comprising six years after the moment in which the lagoon began to reflect the impact of the degradation of the ecosystem. this negative return differential represents a total loss in housing wealth of more than 4 billion euros, around ten times the gains from the very change from dry - farming to irrigated crops which made this ecosystem fragile in the first place. as a result, the return on housing investment was 43 % lower in the surroundings of the mar menor than in comparable neighbouring areas between 2015 and 2021, a six - year period after the moment in which the lagoon began to reflect the impact of the ecosystem ’ s degradation. this negative return differential represents a total loss in housing wealth of more than €4 billion, around ten times the gains from the very change from dry - farming to irrigated crops which made this ecosystem fragile in the first place. the authors also show that the median mortgage principal in the control area has risen by more than 40 %, while remaining unchanged in the mar menor area, suggesting that banks have incorporated lower housing values into their lending decisions. also, the number of house purchases, which was similar in both areas prior to 2015, has almost doubled since in the control area relative to the area around the mar menor, reflecting the weaker performance of the latter ’ s economy. the analysis suggests that house buyers and property investors did not account for climaterelated risks and their impact on the lagoon. it is only when these risks materialise and the public becomes aware of them that climate - sensitive assets, such as real estate, undergo a shift in prices the economic implications of transition risks according to the ngfs simulations that i mentioned at the beginning of my speech, the implementation of policies to achieve an energy transition that would cut net co 2 emissions to zero by 2050 – not only by means of strict climate policy, but also by boosting innovation – would significantly reduce the economic costs associated with the extreme and