Climate Interconnectedness and Financial Stability (2024)
Finance . 45:145-195 (2024/1)
Miia Chabot, Jean-Louis Bertrand, Valentin Courquin
Summary
Climate risks directly affect a wide range of non-financial companies and indirectly the financial institutions that lend to or invest in them.
In this paper, we explore the influence of climate risks on the financial stability of European financial institutions using network analysis and panel regressions.
Determining interconnection variables and graphical representations of climate networks allow identifying systemically important financial institutions and risk concentrations.
Our work contributes to the development of new macroprudential measures to capture climate risks and address climate-related risks from a systemic perspective.