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Dynamic impact of climate risks on financial systemic risk: Evidence from China

Author

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  • Ruwei Tian
  • Xin Li

Abstract

As climate issues gain increasing attention, climate‐related risks now appear to have the potential to be transmitted to the financial system. This paper utilizes a bootstrap rolling window Granger causality test to explore the dynamic correlation between climate transition risk (CTR), climate physical risk (CPR), and financial systemic risk. Empirical findings reveal that, during periods of intensive climate policy transformation, CTR exhibits a significant enhancing effect on systemic financial risk. However, no such phenomenon is observed for CPR. This research indicates that the uncertainty brought about by transitions in climate policy can significantly influence financial systemic risk.

Suggested Citation

  • Ruwei Tian & Xin Li, 2025. "Dynamic impact of climate risks on financial systemic risk: Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 25(1), March.
    • Handle: RePEc:bla:irvfin:v:25:y:2025:i:1:n:e12470
    DOI: 10.1111/irfi.12470
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    Cited by:

    1. Yi Zhang & Pan Xia & Xinjie Zheng, 2025. "Climate Risks and Common Prosperity for Corporate Employees: The Role of Environment Governance in Promoting Social Equity in China," Sustainability, MDPI, vol. 17(15), pages 1-31, July.
    2. Yun Liu & Yuchang Cao & Jingyao Huang, 2025. "Decarbonization Commitment, Political Connections, and Firm Value: Evidence from China," JRFM, MDPI, vol. 18(9), pages 1-20, September.
    3. Du, He & Bi, Chaowen & Yan, Jiale, 2025. "Extreme climate risk and energy consumption structure," Finance Research Letters, Elsevier, vol. 80(C).
    4. Alkatheeri, Hanan & Mertzanis, Charilaos & Kampouris, Ilias, 2026. "Climate laws and financial stability," Research in International Business and Finance, Elsevier, vol. 81(C).
    5. Minye Rao & Guannan Chen & Zhenhuang Yang & Hok Kun Wan & Huangxin Chen, 2025. "Does Climate Risk Impacts Government Environmental Concern in China? Insights from the Volatility of Spatial Spillover Effects," SAGE Open, , vol. 15(4), pages 21582440251, November.
    6. Hu, Xin & Zhu, Bo & Liu, Jiahao, 2025. "Does climate transition risk threaten China's energy system stability? Insights from high-dimensional systemic risk spillover network," Energy Economics, Elsevier, vol. 149(C).
    7. Ameni Mtibaa & Foued Badr Gabsi, 2025. "Assessing the Environmental Impact of Fiscal Consolidation in OECD Countries: Evidence from the Panel QARDL Approach," JRFM, MDPI, vol. 18(9), pages 1-21, September.

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