Flight to climatic safety: local natural disasters and global portfolio flows

Fabrizio Ferriani, Andrea Giovanni Gazzani and Filippo Natoli ()
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Filippo Natoli: Bank of Italy

No 1420, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Using data from a broad panel of countries at a weekly frequency, we find that local natural disasters have significant effects on global portfolio flows. First, when disasters strike, international investors reduce their net flows to equity mutual funds exposed to affected countries. This only happens when disasters occur in the emerging economies that are more exposed to climate risk. Second, natural disasters lead investors to reduce their portfolio flows into unaffected, high-climate-risk countries in the same region as well. Third, disasters in high-climate-risk emerging economies spur investment flows into advanced countries that are relatively safer from a climate risk standpoint. Overall, this suggests that natural disasters trigger an updating of beliefs about global climate threats that are propagated via a new channel: international investors search for climatic safety.

Keywords: climate change; natural disasters; capital flows; flight-to-safety; emerging markets (search for similar items in EconPapers)
JEL-codes: C32 C33 E44 F3 Q54 (search for similar items in EconPapers)
Date: 2023-07
New Economics Papers: this item is included in nep-env, nep-fdg and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1420_23

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