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The effects of climate change‐related risks on banks: A literature review

Author

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  • Olivier de Bandt
  • Laura‐Chloé Kuntz
  • Nora Pankratz
  • Fulvio Pegoraro
  • Haakon Solheim
  • Gregory Sutton
  • Azusa Takeyama
  • Fan Dora Xia

Abstract

This literature review describes the recent empirical literature in economics and finance focusing on how climate change‐related risks affect banks, with a particular emphasis on microeconomic evidence. The comparison of empirical estimates shows that many studies project limited estimates of damages for banks. For both loan and bond spreads, most estimates of the effect of climate change are below 50 bp. In comparison, studies on stock markets document responses that are more substantial. In real estate markets, there is evidence of price effects notably for flood risks associated with sea level rise. However, some studies indicate that climate risks could be underestimated. We note challenges related to the measurement of adaptation potential, non‐linear changes in hazards and responses, and the aggregation of effects across studies, markets, and bank portfolios.

Suggested Citation

  • Olivier de Bandt & Laura‐Chloé Kuntz & Nora Pankratz & Fulvio Pegoraro & Haakon Solheim & Gregory Sutton & Azusa Takeyama & Fan Dora Xia, 2025. "The effects of climate change‐related risks on banks: A literature review," Journal of Economic Surveys, Wiley Blackwell, vol. 39(4), pages 1553-1594, September.
    • Handle: RePEc:bla:jecsur:v:39:y:2025:i:4:p:1553-1594
    DOI: 10.1111/joes.12665
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    2. Petre Caraiani & Onur Polat & Rangan Gupta & Elie Bouri, 2025. "Climate Risks and Predictability of Financial Risks in the US Banking Sector," Working Papers 202507, University of Pretoria, Department of Economics.
    3. Silva, Thiago Christiano & Wilhelm, Paulo Victor Berri & Guerra, Solange Maria & Tabak, Benjamin Miranda, 2025. "Extreme weather and firm borrowing: Evidence from Brazil," Finance Research Letters, Elsevier, vol. 86(PG).
    4. Tachy, Marcelo Martins & Vasconcelos, Gláucia Fernandes & dos Santos Mendes, Layla, 2026. "A global assessment of banks’ capacity to support the energy transition: Evidence from developed and emerging markets," Journal of International Money and Finance, Elsevier, vol. 160(C).
    5. Delis, Manthos & Iosifidi, Maria, 2025. "Green Lending," MPRA Paper 125118, University Library of Munich, Germany.
    6. Rega, Federico Giovanni & Russo, Simona & Salerno, Dario, 2025. "Disentangling the S and the G in the European banking industry: The role of climate risk and opportunity awareness," Research in International Business and Finance, Elsevier, vol. 77(PB).
    7. Alkatheeri, Hanan & Mertzanis, Charilaos & Kampouris, Ilias, 2026. "Climate laws and financial stability," Research in International Business and Finance, Elsevier, vol. 81(C).
    8. D’Orazio, Paola, 2025. "Climate risks and financial stability: Evidence on the effectiveness of climate-related financial policies," International Review of Financial Analysis, Elsevier, vol. 105(C).
    9. Chen, Sichong & Xu, Qiyuan & Zeng, Jingjing & Zhao, Yunfeng, 2025. "Ark amidst floods: Evidence from personal credit at a Chinese bank," International Review of Financial Analysis, Elsevier, vol. 106(C).
    10. Martín Saldias & Roberto Panzica, 2025. "Uncovering transition risk: A new stress testing approach for the banking sector," Working Papers w202520, Banco de Portugal, Economics and Research Department.
    11. Pacelli, Vincenzo & Foglia, Matteo & Mariano, Dayana, 2025. "The link between climate and systemic risk: A bibliometric and systematic literature review," Research in International Business and Finance, Elsevier, vol. 79(C).
    12. Alves, José & Menescal, Lucas, 2025. "Green finance under fire: Navigating financial and geopolitical risk through climate adaptation strategies," Finance Research Letters, Elsevier, vol. 85(PC).
    13. Adriano Bellinvia & Paola Brighi & Valeria Venturelli, 2026. "Banks and climate risk: a bibliometric review and policy perspective," Journal of Banking Regulation, Palgrave Macmillan, vol. 27(2), pages 1-29, June.
    14. Grinstein, Yaniv & Larkin, Yelena, 2025. "Corporate environmental footprint and product market competition," Journal of Financial Intermediation, Elsevier, vol. 64(C).

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