A senior policymaker at the European Central Bank has said the climate emergency and the breakdown of nature poses a dramatically growing risk to the global economy.

Frank Elderson, a member of the ECB’s executive board, said the eurozone lender of last resort was stepping up its monitoring of the financial risks linked to the destruction of “ecosystem services”, which are nature-related processes or assets that support human activity.

“These services are not stable but they are in rapid decline. That’s why we talk about the climate and nature crises,” he said. “So knowing that dependency, and knowing those exposures by the banks, we come to the conclusion that this is relevant.”

Across France and Spain, wildfires have raged amid record-breaking temperatures, torching land, businesses and homes, in an emergency that will carry a heavy economic cost beside the direct human toll.

In an interview with the Guardian before the current devastation across Europe, Elderson said it was clear the rising frequency of natural disasters linked to global heating pos a threat to financial stability.

He said more work needed to be done to assess the risk from the collapse of ecosystem services, as reliance on nature was more complicated to map than the impact of a single extreme weather event.

Ecosystem services are defined as any benefit that can be drawn from a natural structure or process – for example, water can be used as a raw material, an energy source through hydropower, or for transportation. It is also a habitat for marine life critical for food production, and a basis for recreational services.

“Nature-related risks can pose material economic and financial risks, including through their impacts on credit risk, growth, inflation and – over the long-term – potential financial instability,” Elderson said.

“I did interviews [previously] saying, you know, if you destroy nature, you destroy the core on which our economies depend. And that got people’s attention. This is not some kind of a flower-power, tree-hugging exercise. This is core economics. This is core financial stability, core price stability.”

As the supervisor responsible for Europe’s largest banks, the ECB has launched a programme of work to assess how the escalating damage to ecosystem services could expose the financial system to risk.

The central bank plans to publish analysis later this year investigating how “ecosystem degradation pathways” could translate into credit loss dynamics for the eurozone’s banks.

A Dutch lawyer and central banker, Elderson was instrumental in the creation of the Network for Greening the Financial System (NGFS) in 2017, alongside Mark Carney and François Villeroy de Galhau, the then chiefs of the Bank of England and Banque de France. He served as founding chair of the group of 114 global central banks and financial supervisors pushing to develop climate risk management.

The green agenda in financial services has faced pushback under the US presidency of Donald Trump, as some businesses battle to remain engaged in the fossil-fuel economy.

Trump pulled the US out of the NGFS last year, leaving Europe to take the lead on climate-related risks without the involvement of the world’s most powerful economy.

Elderson said the banking industry remained convinced that climate and nature-related risks had to be addressed.

“I would think it’s very difficult to find a bank in Europe that will honestly tell you that they think this is not relevant,” he said. “I think that time has passed.”