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Assessment of the exposure of the Portuguese banking system to non-financial corporations sensitive to climate transition risks

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  • Ricardo Marques

Abstract

Climate change is a source of risk to financial stability. This article presents a quantification of the exposure of the Portuguese banking system to non-financial corporations (NFCs) sensitive to the risks arising from the transition to a low-carbon economy. The results suggest that about 60% of banks’ exposures to NFCs are in climate-policy-relevant sectors (CPRS), chiefly in the sectors dedicated to construction, transaction and use of buildings and, to a lesser extent, in sectors associated with the production and use of means of transportation and in energy-intensive industries. This article also presents a methodology for estimating direct greenhouse gas (GHG) emissions, by sector of activity, from resident NFCs with bank financing. The calculation of carbon intensity on the basis of these estimates shows that around 60% of banks’ exposures to NFCs is below the median of this indicator. This result is consistent with the higher concentration of exposures in climate-policy-relevant sectors with lower direct GHG emissions.

Suggested Citation

  • Ricardo Marques, 2021. "Assessment of the exposure of the Portuguese banking system to non-financial corporations sensitive to climate transition risks," Working Papers o202101, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:o202101
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    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/op202101_eng.pdf
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    References listed on IDEAS

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    1. Stefano Battiston & Antoine Mandel & Irene Monasterolo & Franziska Schütze & Gabriele Visentin, 2017. "A climate stress-test of the financial system," Nature Climate Change, Nature, vol. 7(4), pages 283-288, April.
    2. Robert Vermeulen & Edo Schets & Melanie Lohuis & Barbara Kolbl & David-Jan Jansen & Willem Heeringa, 2018. "An energy transition risk stress test for the financial system of the Netherlands," DNB Occasional Studies 1607, Netherlands Central Bank, Research Department.
    3. Patrick Bolton & Morgan Despres & Luiz Awazu Pereira da Silva & Frédéric Samama & Romain Svartzman, 2020. "The green swan," BIS Books, Bank for International Settlements, number 31.
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    More about this item

    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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