Climate Interconnectedness and Financial Stability

Miia Chabot, Jean-Louis Bertrand and Valentin Courquin
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Miia Chabot: ESSCA - ESSCA – École supérieure des sciences commerciales d'Angers = ESSCA Business School
Jean-Louis Bertrand: ESSCA - ESSCA – École supérieure des sciences commerciales d'Angers = ESSCA Business School
Valentin Courquin: LAMPA - Laboratoire Angevin de Mécanique, Procédés et InnovAtion - Arts et Métiers Sciences et Technologies

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Abstract: Climate risks directly affect a wide range of non-financial firms, and indirectly affect the financial institutions that lend to or invest in them. In this paper, we explore the influence of climate risks on financial stability of European financial institutions using network analysis and panel regressions. The determination of interconnectedness variables and the graphical representations of climate networks allow the identification of climate systemic important financial institutions and risk concentrations. Our work contributes to the development of new macroprudential metrics to capture climate risks and address climate-related risk from a systemic perspective.

Date: 2023-12-21
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Published in Finance, 2023, Vol. 45 (1), pp.145-195. ⟨10.3917/fina.pr.024⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04390905

DOI: 10.3917/fina.pr.024

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