We examine banks’ exposure to climate transition risk using a bottom-up, loan-level methodology incorporating climate stress test based on the Merton probability of default model and transition pathways from the IPCC. Specifically, we match machine learning predictions of corporate carbon...

Existing research finds that climate-related natural disasters generally have had insignificant effects on banks. In contrast, using forward-looking measures of climate risk at the U.S. county-level, we provide evidence that banks’ non-agency residential mortgage and small business lending as...

Climate change causes natural disasters to occur at higher frequency and increased severity. Using a unique dataset on German banks, this paper explores how regionally less diversified banks in Germany adjusted their loan loss provisioning following the severe summer flood of 2013, which...

Climate change poses several risks to the value of financial assets and financial stability. The study conducted in this paper focuses on the German banking sector and estimates its exposure to climate risks arising from a transition to a carbon-neutral economy. Our analysis identifies the...

Addressing climate change as well as the role of banks in this process requires better measures about the exposures of firms and banks to climate related risks. We usually have data for large, publicly listed firms due to enhanced disclosure requirements. In this paper, we provide first...

This paper investigates the size-efficiency relation of European cooperative banks during the 2006-2015 period. We employ the Stochastic Frontier Analysis in order to obtain inefficiency estimates and its determinants on the set of 183 cooperative banks from 12 European countries. This work...

In recent years there has been growing attention on the risks posed by climate change. One relevant question for financial stability is to which extent the materialisation of transition risks emerging from the sudden implementation of climate change mitigation policies would impact the financial...

Using a rare flood in April 2019 in Iran as a natural experiment, we study the role of local banks in mitigating the financial consequence of natural disasters to smallholder farmers. We find that local branches immediately react to the disaster by increasing their lending for two months...

We study Puerto Rico's experience after the severe hurricane season of 2017 to better understand how extreme weather disasters affect bank stability and their ability to lend. Despite the devastation wrought by two category 5 hurricanes in a single month, we find relatively modest and transitory...

This paper examines whether and how banks adapt to long-run climate change. We show that banks increase their loan loss provisions by 7% in response to a 1°F increase in three-year weighted average abnormal temperature. Such an effect is more pronounced when banks have greater pre-existing...