Is climate transition risk priced into corporate credit risk? Evidence from credit default swaps

Andrea Ugolini, Juan Reboredo and Javier Ojea-Ferreiro

Research in International Business and Finance, 2024, vol. 70, issue PB

Abstract: We study whether climate transition risk is reflected in the credit default swap (CDS) spreads of European firms. Using information on the vulnerability of a firm’s value to the transition to a low-carbon economy, we construct a climate transition risk (CTR) factor, and report how this factor shifts the term structure of the CDS spreads of more but not of less vulnerable firms. Considering the CTR factor, we find that different climate transition policies have asymmetric and significant economic impacts on the credit risk of more vulnerable firms, and negligible effects on less vulnerable firms.

Keywords: Climate transition risk; CDS spreads; credit risk (search for similar items in EconPapers)
JEL-codes: C24 G12 G32 Q54 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Is Climate Transition Risk Priced into Corporate Credit Risk? Evidence from Credit Default Swaps (2023)
Working Paper: Is Climate Transition Risk Priced into Corporate Credit Risk? Evidence from Credit Default Swaps (2023)
Working Paper: Is Climate Transition Risk Priced into Corporate Credit Risk? Evidence from Credit Default Swaps (2023)
Working Paper: Is climate transition risk priced into corporate credit risk? Evidence from credit default swaps (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:70:y:2024:i:pb:s027553192400165x

DOI: 10.1016/j.ribaf.2024.102372

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