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The contagion effects and network analysis of climate-related risk events: Global and regional evidence

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  • Hsiao, Cody Yu-Ling
  • Yang, Rui
  • Chiu, Yi-Bin
  • Chui, Chin Man

Abstract

This paper examines the impact of 2009–22 climate-related risk events on five major economic sectors in various regions and markets. Employing the multiple-dependence contagion test, we develop a risk sensitivity index and network analysis to quantify the intensity and direction of risk transmission within the financial system. The findings reveal that transition risk events (e.g., the Glasgow Climate Pact) generate stronger contagion effects than do physical risk events (e.g., European heatwaves). Among economic sectors, Financials exhibit the highest vulnerability, followed by Energy, with Utilities the least affected. Developed markets experience greater exposure to climate risks than do emerging markets, with European sectors being the most impacted, followed by the Americas, with Asia being the least affected. Network analysis identifies Industrials, Financials, and Energy as the primary transmitters of climate risk shocks. Overall, this study has important policy implications for financial stability, risk management, and climate resilience.

Suggested Citation

  • Hsiao, Cody Yu-Ling & Yang, Rui & Chiu, Yi-Bin & Chui, Chin Man, 2025. "The contagion effects and network analysis of climate-related risk events: Global and regional evidence," International Review of Economics & Finance, Elsevier, vol. 104(C).
    • Handle: RePEc:eee:reveco:v:104:y:2025:i:c:s1059056025008937
    DOI: 10.1016/j.iref.2025.104730
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