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

Author

Listed:
  • Olivier de Bandt

    (Banque de France - Banque de France - Banque de France)

  • 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-THEMA - 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 - CNRS - Centre National de la Recherche Scientifique - THEMA - Théorie économique, modélisation et applications - CNRS - Centre National de la Recherche Scientifique - CY - CY Cergy Paris Université)

  • Haakon Solheim

    (Norges Bank)

  • Gregory Sutton

    (BIS - Bank for International Settlements)

  • Azusa Takeyama

    (Bank of Japan)

  • Fan Dora Xia

    (BIS - Bank for International Settlements)

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.

Suggested Citation

  • Olivier de Bandt & Laura‐chloé Kuntz & Nora Pankratz & Fulvio Pegoraro & Haakon Solheim & Gregory Sutton & Azusa Takeyama & Fan Dora Xia, 2024. "The effects of climate change‐related risks on banks: A literature review," Post-Print halshs-04948450, HAL.
    • Handle: RePEc:hal:journl:halshs-04948450
    DOI: 10.1111/joes.12665
    as

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