This paper studies the exposure of European investment funds to transition climate risks and its implications for the rest of the financial system. Based on granular data on investment funds’ assets and liabilities, we measure the percentage of brown assets in funds' portfolios and the extent...

This paper builds a framework to quantify the financial stability implications of climate-related transition risk in Colombia. We explore risks imposed on the banking system based on scenarios of an increase in the domestic carbon tax by using bank- and firm-level data. Focusing on the...

For the euro debt crisis, we assess the relevance of financial contagion from an investor perspective. We find that contagion, which we identify through the joint occurrence of extremely negative bond returns, has only small and transitory effects on broad government bond portfolios. For...

Since the 2008 Lehman bankruptcy, it is clearly shown that global economic and financial crises present major challenges to private households, requiring from them, a high level of shock absorption capacity. According to the old adage, “Do not put all the eggs in one basket”, resilience...

Since the 2008 Lehman bankruptcy, it is clearly shown that global economic and financial crises present major challenges to private households, requiring from them, a high level of shock absorption capacity. According to the old adage, "Do not put all the eggs in one basket", resilience depends,...

Diversification of financial securities is considered a substantial element of portfolio risk. In this context, the construction of an optimal portfolio is an ongoing concern for portfolio managers. This study measures the risk-reward tradeoffs linked to the stock indexes of Germany, Spain,...

Fighting climate change is one of the biggest challenges in the 21st century. Climate change that leads to global warming has been increasingly visible in our environment. Extreme weather conditions such as hurricanes, floods, and droughts have been escalating and their acceleration can be...

We study whether floods can affect financial stability through a credit risk channel. Our focus is on the Netherlands, a country situated partly below sea level, where insurance policies exclude property damages caused by some types of floods. Using geocoded data for close to EUR 650 billion in...

We examine the association between carbon risk and future stock price crash risk and the moderating role of climate change disclosures in this association using a sample of firms across the world. We find that carbon risk is positively associated with future stock price crash risk, and...