The effects of climate change‐related risks on banks: A literature review

Olivier de Bandt, Laura‐chloé Kuntz, Nora Pankratz, Fulvio Pegoraro, Haakon Solheim, Gregory Sutton, Azusa Takeyama and Fan Dora Xia
Additional contact information
Laura‐chloé Kuntz: Deutsche Bundesbank - Deutsche Bundesbank
Nora Pankratz: University of Toronto
Fulvio Pegoraro: Banque de France - Banque de France - Banque de France, Banque de France - ACPR, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Haakon Solheim: Norges Bank
Gregory Sutton: BIS - Bank for International Settlements
Azusa Takeyama: Bank of Japan
Fan Dora Xia: BIS - Bank for International Settlements

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Abstract: This literature review describes the recent empirical literature in economics and finance focusing on how climate change‐related risks affect banks, with a particular emphasis on microeconomic evidence. The comparison of empirical estimates shows that many studies project limited estimates of damages for banks. For both loan and bond spreads, most estimates of the effect of climate change are below 50 bp. In comparison, studies on stock markets document responses that are more substantial. In real estate markets, there is evidence of price effects notably for flood risks associated with sea level rise. However, some studies indicate that climate risks could be underestimated. We note challenges related to the measurement of adaptation potential, non‐linear changes in hazards and responses, and the aggregation of effects across studies, markets, and bank portfolios.

Date: 2024-10
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Published in Journal of Economic Surveys, 2024, ⟨10.1111/joes.12665⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-04948450

DOI: 10.1111/joes.12665

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