HETEROGENEOUS RESPONSES OF COMMERCIAL BANKS TO VARIOUS CLIMATE RISKS: EVIDENCE FROM 42 A-SHARE LISTED BANKS IN CHINA

Wenna Fan, Feng Wang, Hao Zhang, Rui Ling and Hongfei Jiang
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Wenna Fan: School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China
Feng Wang: School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China
Hao Zhang: School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China
Rui Ling: School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China
Hongfei Jiang: School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China

Climate Change Economics (CCE), 2024, vol. 15, issue 04, 1-32

Abstract: Financial supervisors across the world recognize the threats posed by climate change. This research aims to examine the immediate impact of climate risks on bank returns using an event study methodology, with data from 42 A-share listed banks in China spanning the years 2012–2022. The findings reveal a delayed effect of climate risks on commercial banks. Hydrological disasters such as floods significantly reduce the returns of large state-owned, national joint-stock, and city commercial banks. Additionally, the launch of China’s carbon emissions trading market leads to a short-term decline in returns for national joint-stock banks, while rising loan exposure and weakening market sensitivity (MS), induced by climate change, reduce the returns of commercial banks. However, bolstering credit risk management proves effective in enhancing profitability. This study provides insights at the market level into the financial implications of climate change for banking institutions, supplementing existing evidence.

Keywords: Climate change; A-share listed banks; physical risk; transition risk; returns; event study methodology (search for similar items in EconPapers)
JEL-codes: G21 Q54 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S2010007824500064

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