Risks on global financial stability induced by climate change: the case of flood risks

Antoine Mandel, Timothy Tiggeloven, Daniel Lincke, Elco Koks, Philip Ward and Jochen Hinkel
Additional contact information
Timothy Tiggeloven: VU - Vrije Universiteit Amsterdam [Amsterdam]
Daniel Lincke: Global Climate Forum e.V.
Elco Koks: VU - Vrije Universiteit Amsterdam [Amsterdam]
Philip Ward: VU - Vrije Universiteit Amsterdam [Amsterdam]
Jochen Hinkel: Global Climate Forum e.V.

Post-Print from HAL

Abstract: There is increasing concern among financial regulators that changes in the distribution and frequency of extreme weather events induced by climate change could pose a threat to global financial stability. We assess this risk, for the case of floods, by developping a simple model of the propagation of climate-induced shocks through financial networks. We show that the magnitude of global risks is determined by the interplay between the exposure of countries to climate-related natural hazards and their financial leverage. Climate change induces a shift in the distribution of impacts towards high-income countries and thus larger amplification of impacts as the financial sectors of high-income countries are more leveraged. Conversely, high-income countries are more exposed to financial shocks. In high-end climate scenarios, this could lead to the emergence of systemic risk as total impacts become commensurate with the capital of the banking sectors of countries that are hubs of the global financial network. Adaptation policy, or the lack thereof, appears to be one of the key risk drivers as it determines the future exposure of high-income coun

Keywords: Financial Stability; Climate Impacts; Flood Risks (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-agr, nep-env and nep-fdg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03523343v1
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Published in Climatic Change, 2021, 166 (1-2), pp.4. ⟨10.1007/s10584-021-03092-2⟩

Downloads: (external link)
https://shs.hal.science/halshs-03523343v1/document (application/pdf)

Related works:
Journal Article: Risks on global financial stability induced by climate change: the case of flood risks (2021)
Working Paper: Risks on global financial stability induced by climate change: the case of flood risks (2021)
Working Paper: Risks on global financial stability induced by climate change: the case of flood risks (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-03523343

DOI: 10.1007/s10584-021-03092-2

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().