No need to worry? Estimating the exposure of the German banking sector to climate-related transition risks

Paola D'Orazio, Tobias Hertel and Fynn Kasbrink

No 946, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Climate change poses several risks to the value of financial assets and financial stability. The study conducted in this paper focuses on the German banking sector and estimates its exposure to climate risks arising from a transition to a carbon-neutral economy. Our analysis identifies the energy, transportation, and manufacturing sectors as the most sensitive to transition risks and shows that the German banking sector's direct exposure to climate transition risks is non-negligible. Moreover, it points out that an amplified exposure to transition risks characterizes large private banks. These findings are comparable to other countries' exposures and relevant to financial supervision and regulation, calling for increased engagement to assess, measure, and manage climate-related financial risks.

Keywords: Climate-related financial risks; transition risks; banking sector; climate policy; climate neutrality; climate-related prudential regulation (search for similar items in EconPapers)
JEL-codes: E58 G21 Q53 Q54 (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-ene, nep-env and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:946

DOI: 10.4419/96973108

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