Climate change attention and systemic financial risk: A TENET analysis

Cheng Zhang, Yana Li and Shuo Liang

Finance Research Letters, 2025, vol. 72, issue C

Abstract: Climate change is becoming increasingly critical for global economic development and financial stability. This study uses the Tail Event-driven Network (TENET) method to integrate a Climate Change Attention index, derived from China Central Television News, into a risk contagion network to examine how climate change influences systemic financial risk. The results show that incorporating attention to climate change reduces systemic financial risk, whereas high- and low-carbon sectors exhibit heightened sensitivity. The Diversified Financials sector show reduced spillover to high-carbon industries, but strong connections with low-carbon industries are maintained. Overall, increased attention to climate change drives capital shifts in the Diversified Financials sector from high- to low-carbon industries, reducing network connectivity and systemic financial risk. These findings offer a novel theoretical perspective on climate-related risk contagions.

Keywords: Climate change attention; Systemic risk; TENET method (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324015848

DOI: 10.1016/j.frl.2024.106555

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