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Dynamic impact of climate risks on financial systemic risk: Evidence from China

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  • Ruwei Tian
  • Xin Li

Abstract

As climate issues gain increasing attention, climate‐related risks now appear to have the potential to be transmitted to the financial system. This paper utilizes a bootstrap rolling window Granger causality test to explore the dynamic correlation between climate transition risk (CTR), climate physical risk (CPR), and financial systemic risk. Empirical findings reveal that, during periods of intensive climate policy transformation, CTR exhibits a significant enhancing effect on systemic financial risk. However, no such phenomenon is observed for CPR. This research indicates that the uncertainty brought about by transitions in climate policy can significantly influence financial systemic risk.

Suggested Citation

  • Ruwei Tian & Xin Li, 2025. "Dynamic impact of climate risks on financial systemic risk: Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 25(1), March.
    • Handle: RePEc:bla:irvfin:v:25:y:2025:i:1:n:e12470
    DOI: 10.1111/irfi.12470
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