Because wages are sticky in the short run, a fixed exchange rate would force the economy to adjust to terms-of-trade shocks mainly through changes in output and employment - and the result would be exaggerated swings in economic activity.
Losses can arise from both direct damage and from the effects that potentially higher maintenance costs, disruption and lower labour productivity could have on profitability and hence default risk. Risks from delaying the response to climate change The second source of risk for the financial sector arises from the pathway taken to a carbon-neutral world.