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Climate risk and biodiversity exposure

Author

Listed:
  • Boakye, Ernest Owusu
  • Heimonen, Kari

Abstract

This study investigates the impact of climate and biodiversity-related risks on financial stress in the EU, USA, and UK using the DCC-MGARCH model. The results indicate that stringent environmental policies initially increase financial stress in the short term, however, these effects diminish over time, leading to reductions in stress by promoting sustainable growth. Persistent volatility spillovers across regions highlight the interconnectedness of global financial systems and the systemic nature of climate-related shock. Although there is short-term volatility, markets generally stabilize as policy impacts become evident.

Suggested Citation

  • Boakye, Ernest Owusu & Heimonen, Kari, 2026. "Climate risk and biodiversity exposure," Economics Letters, Elsevier, vol. 258(C).
    • Handle: RePEc:eee:ecolet:v:258:y:2026:i:c:s0165176525005622
    DOI: 10.1016/j.econlet.2025.112725
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F10 - International Economics - - Trade - - - General
    • F30 - International Economics - - International Finance - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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