Chiara Lelli
Macro Prud Policy&Financial Stability
- Division
Stress Test Modelling
- Current Position
-
Financial Stability Analyst
- Fields of interest
-
Mathematical and Quantitative Methods,Microeconomics,Other Special Topics
- Education
- 2018-2021
MSc in Mathematical Engineering, Politecnico di Milano, Milan, Italy
- 2014-2017
BSc in Mathematical Engineering, Politecnico di Milano, Milan, Italy
- Professional experience
- 2020-2022
Data Science Analyst - Financial Statistics Division, Directorate General Statistics, European Central Bank
- 1 December 2023
- OCCASIONAL PAPER SERIES - No. 335Details
- 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. 333Living in a world of disappearing nature: physical risk and the implications for financial stabilityDetails
- 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
- 6 September 2023
- OCCASIONAL PAPER SERIES - No. 328Details
- Abstract
- Transition to a carbon-neutral economy is necessary to limit the negative impact of climate change and has become one of the world’s most urgent priorities. This paper assesses the impact of three potential transition pathways, differing in the timing and level of ambition of emissions’ reduction, and quantifies the associated investment needs, economic costs and financial risks for corporates, households and financial institutions in the euro area. Building on the first ECB top-down, economy-wide climate stress test, this paper contributes to the field of climate stress testing by introducing three key innovations. First, the design of three short-term transition scenarios that combine the transition paths developed by the Network for Greening the Financial System (NGFS) with macroeconomic projections that allow for the latest energy-related developments. Second, the introduction of granular sectoral dynamics and energy-specific considerations by country relevant to transition risk. Finally, this paper provides a comprehensive analysis of the impact of transition risk on the euro area private sector and on the financial system, using a granular dataset that combines climate, energy-related and financial information for millions of firms with the euro area credit register and securities database and country-level data on households. By comparing different transition scenarios, the results of the exercise show that acting immediately and decisively would provide significant benefits for the euro area economy and financial system, not only by maintaining the optimal net-zero emissions path (and therefore limiting the physical impact of climate change), but also by limiting financial risk. An accelerated transition to a carbon-neutral economy would be helpful to contain risks for financial institutions and would not generate financial stability concerns for the euro area, provided that firms and households could finance their green investments in an orderly manner. However, the heterogeneous results across economic sectors and banks suggest that more careful monitoring of certain entity subsets and of credit exposures will be required during the transition process.
- JEL Code
- C53 : Mathematical and Quantitative Methods→Econometric Modeling→Forecasting and Prediction Methods, Simulation Methods
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
Q47 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy Forecasting
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming