How Climate Change Affects Systemic Financial Risk:Evidence from Extreme Climate Events and Green(Brown)Assets
This study investigates the relationship between climate change and sys-temic risk in China's financial system.First,it examines the responsiveness of sys-temic risk in the banking,securities,and insurance sectors to extreme climate events,assessing how different financial industries withstand such disasters.The findings confirm that certain extreme climate events can exacerbate systemic financial risk.Second,by constructing a nonlinear autoregressive distributed lag(NARDL)model,this study analyzes the impact of the performance of green and brown market stock indices on the systemic risk of financial sub-sectors.The results indicate that in the short term,an increase in the risk of brown assets and a decrease in their indices significantly amplify systemic risk in the financial industry.However,in the long term,an increase in the brown asset index raises systemic risk in the banking sector,while an increase in the green asset index reduces systemic risk in the securities sector.Furthermore,a reduction in green asset risk significantly lowers systemic risk in the banking sector.In addition,this study underscores the importance of policies address-ing the increasing frequency and severity of climate-related disasters.It recommends differentiated financial prudential regulations for green and brown sectors to mini-mize transition risks associated with climate policy implementation while mitigating physical risks.This approach is crucial to improve risk management frameworks in the financial industry,thereby reducing the impact of both physical and transition risks on systemic risk.
万方数据
维普
