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Do climate risks matter for intersectoral systemic risk spillovers? Evidence from China

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  • Hu, Xin
  • Zhu, Bo

Abstract

This study examines how climate physical risk (CPR) and climate transition risk (CTR) influence systemic risk spillovers across China's economic and financial sectors. Using a quantile connectedness approach, we estimate the intersectoral risk spillovers. The results show that CTR significantly exacerbates these spillovers, particularly in energy-intensive sectors, while CPR's impact is less pronounced. Moreover, we uncover an interaction between CPR and CTR and show that CTR's effects intensify during periods of heightened economic policy uncertainty. These findings reveal climate risks' critical threat to economic and financial stability and suggest developing prudential regulations to mitigate climate-induced systemic risk.

Suggested Citation

  • Hu, Xin & Zhu, Bo, 2025. "Do climate risks matter for intersectoral systemic risk spillovers? Evidence from China," Finance Research Letters, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:finlet:v:75:y:2025:i:c:s1544612325001382
    DOI: 10.1016/j.frl.2025.106873
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    More about this item

    Keywords

    Climate physical risk; Climate transition risk; Intersectoral systemic risk spillovers; Quantile connectedness approach;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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