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Heterogeneous Responses Of Commercial Banks To Various Climate Risks: Evidence From 42 A-Share Listed Banks In China

Author

Listed:
  • WENNA FAN

    (School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China)

  • FENG WANG

    (School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China)

  • HAO ZHANG

    (School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China)

  • RUI LING

    (School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China)

  • HONGFEI JIANG

    (School of Economics and Management, China University of Mining and Technology, Xuzhou, Jiangsu 221116, P. R. China)

Abstract

Financial supervisors across the world recognize the threats posed by climate change. This research aims to examine the immediate impact of climate risks on bank returns using an event study methodology, with data from 42 A-share listed banks in China spanning the years 2012–2022. The findings reveal a delayed effect of climate risks on commercial banks. Hydrological disasters such as floods significantly reduce the returns of large state-owned, national joint-stock, and city commercial banks. Additionally, the launch of China’s carbon emissions trading market leads to a short-term decline in returns for national joint-stock banks, while rising loan exposure and weakening market sensitivity (MS), induced by climate change, reduce the returns of commercial banks. However, bolstering credit risk management proves effective in enhancing profitability. This study provides insights at the market level into the financial implications of climate change for banking institutions, supplementing existing evidence.

Suggested Citation

  • Wenna Fan & Feng Wang & Hao Zhang & Rui Ling & Hongfei Jiang, 2024. "Heterogeneous Responses Of Commercial Banks To Various Climate Risks: Evidence From 42 A-Share Listed Banks In China," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 15(04), pages 1-32, November.
    • Handle: RePEc:wsi:ccexxx:v:15:y:2024:i:04:n:s2010007824500064
    DOI: 10.1142/S2010007824500064
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    Keywords

    Climate change; A-share listed banks; physical risk; transition risk; returns; event study methodology;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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