By Katarina Groeger
Europe’s first heatwave of 2026 was more than a weather event. For many people, it has been a personal experience of unusually high temperatures, disrupted daily routines and growing concern about what the future may bring. For businesses and financial institutions, it is also a powerful reminder that climate-related physical risks are no longer a distant possibility – they are already affecting economies, operations and investment decisions.
During summer, large parts of Europe continuously experience record-breaking temperatures. Recently, France recorded its hottest day on record, with local temperatures reaching 43.8°C, while Spain experienced its hottest June days to date. Germany’s weather service issued widespread red alerts across several regions, including Frankfurt, Bonn and Cologne. The World Meteorological Organization has warned that temperatures in many parts of Europe could remain between 3°C and 10°C above seasonal averages.
These developments underline a simple reality: climate change is no longer a future concern. Its effects are already being felt across Europe through pressure on water resources, disruptions to infrastructure, reduced agricultural productivity, and growing challenges for businesses and local communities. The European Environment Agency has identified Europe as the fastest-warming continent in the world and notes that heatwaves, droughts and floods are becoming more frequent and more intense. Weather- and climate-related extremes have already cost EEA member and cooperating countries dearly, causing an estimated EUR 822 billion in economic losses between 1980 and 2024.
South Eastern and Eastern Europe: Building resilience in a changing climate
For the countries in which ProCredit operates, the implications of climate change are particularly significant. South Eastern and Eastern Europe are among the regions facing increasing exposure to extreme heat, prolonged droughts and growing water stress. The European Environment Agency continues to highlight severe drought pressures across Eastern and South Eastern Europe, particularly for agriculture, ecosystems and water resources.
At the same time, climate resilience is rapidly moving up the agendas of policymakers, regulators and central banks across the region. Climate change is increasingly viewed not only as an environmental issue, but also as a challenge for economic stability, financial resilience and long-term growth.
North Macedonia, for example, has incorporated climate risk management and climate finance into its central bank strategy and is working with international partners to strengthen climate-related supervision. Georgia has expanded its sustainable finance agenda through climate-risk initiatives and stress-testing frameworks designed to strengthen the resilience of its financial sector.
Why this matters for banks
For banks, these developments are about much more than environmental headlines. They increasingly influence how businesses perform, invest and repay their loans. Heatwaves, droughts and water shortages can reduce production, increase operating costs, disrupt supply chains and weaken asset values. A farmer facing lower yields due to drought, a food processor dealing with water restrictions, or a manufacturer experiencing rising cooling costs may all come under pressure. Over time, these challenges can affect profitability, cash flow and loan repayment capacity.
This is particularly relevant for banks serving micro, small and medium-sized enterprises. Many MSMEs have limited resources to assess climate risks, invest in adaptation measures or develop formal transition plans. Yet they are often among the most exposed to climate-related challenges. Supporting these businesses is therefore not only a matter of responsibility – it is also a key component of building long-term portfolio resilience.
The opportunity: Financing resilience
The opportunity for banks is not only reputational. It is also financial. Climate adaptation and mitigation investments can help businesses reduce costs, improve efficiency, strengthen competitiveness and become more resilient to external shocks, while also benefiting banks through stronger client resilience, repayment capacity and portfolio quality. The opportunity is substantial: according to Boston Consulting Group, adaptation and resilience investments could generate USD 100–130 billion annually for banks worldwide.
For South Eastern and Eastern Europe, these opportunities are particularly tangible. Investments in energy efficiency, renewable energy, sustainable agriculture, water management and climate-resilient infrastructure are increasingly seen as smart business moves. Agriculture is a key example, with climate-resilient practices helping to safeguard productivity, farm viability and food security.
ProCredit’s approach
Our approach combines financing with active client engagement. We finance investments that help businesses become more efficient, competitive and resilient, including renewable energy, energy efficiency, sustainable agriculture and other environmentally beneficial projects. By the end of 2025, our green loan portfolio had reached approximately EUR 1.4 billion and included more than 10,000 green projects across our markets.
At the same time, we work closely with clients to help them understand climate-related challenges and identify practical solutions that strengthen long-term performance. From discussions on climate risks and decarbonisation opportunities to transition planning and CO₂ footprint assessments using our own CO₂ Calculator, our goal is to translate sustainability into tangible business value.
Particular attention is given to sectors such as agriculture, where adaptation is becoming increasingly important for maintaining productivity, protecting livelihoods and ensuring business continuity. In these sectors, investments that improve resource efficiency and resilience often go hand in hand with improved competitiveness.
Importantly, resilience also makes financial sense. A recent ProCredit internal study analysing more than 150,000 borrowers found that borrowers with green loans exhibited a statistically significant reduction in the probability of default compared with borrowers without green loans.
While sustainable investments are never a guarantee of lower risk, the findings suggest that businesses investing in efficiency, renewable energy and resilience-building measures may become financially stronger over time. For banks, this creates a powerful alignment between sustainability, client success and long-term portfolio quality.
The first 2026 heatwave has underscored the growing economic and financial risks of climate change, particularly in South Eastern and Eastern Europe, where rising temperatures and water stress are affecting key sectors. As regulators increasingly view climate resilience as financial resilience, adaptation and mitigation are becoming core banking priorities – helping clients reduce risks, strengthen competitiveness and build long-term resilience. The message for banks is clear: climate finance should no longer be seen as a niche sustainability activity, but as a strategic opportunity to support clients, strengthen portfolios and drive economic resilience.
Sources:
• WMO – https://wmo.int/news/media-centre/el-nino-forecast-intensify-increasing-likelihood-of-extreme-weather
• UN News – https://news.un.org/en/story/2026/06/1167808
• European Environment Agency – https://www.eea.europa.eu/en/topics/in-depth/extreme-weather-floods-droughts-and-heatwaves
• European Environment Agency – https://www.eea.europa.eu/en/analysis/indicators/drought-impact-on-ecosystems-in-europe
• Copernicus Climate Change Service – https://climate.copernicus.eu/esotc/2024/heat-and-drought-southeastern-europe
• National Bank of the Republic of North Macedonia – https://climate-adapt.eea.europa.eu/en/metadata/publications/strategic-plan-2025-2027-national-bank-of-republic-of-north-macedonia
• European Investment Bank – https://www.eib.org/en/press/news/north-macedonia-advances-climate-finance-under-the-gfs-programme
• National Bank of Georgia – https://nbg.gov.ge/en/page/sustainable-finance-roadmap
• National Bank of Georgia – https://nbg.gov.ge/en/media/news/national-bank-of-georgia-launches-second-sustainable-finance-roadmap
• UNEP Finance Initiative – https://www.unepfi.org/climate-change/adaptation-finance/
• Boston Consulting Group – Climate Adaptation and Resilience Finance research and publications: https://www.bcg.com/capabilities/climate-change-sustainability
• European Environment Agency – Climate-resilient agriculture and adaptation publications: https://www.eea.europa.eu/en/topics/in-depth/climate-change-impacts-risks-and-adaptation