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Measuring the impact of climate transition risk on the systemic risk: A multivariate quantile-located ES approach

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  • Garcia-Jorcano, Laura
  • Sanchis-Marco, Lidia

Abstract

We introduce a climate systemic risk measure, Delta Climate Transition at Systemic Risk (ΔCT-at-SR), under three climate transition scenarios that indicate different levels of vulnerability to the transition to a low-carbon economy (hot house world, disorderly, and orderly transition). We construct green and brown banking indices based on the carbon risk score (CRS) of banks from Europe, the US, and China. In the estimation and forecasting analysis, we find the highest systemic risk in the disorderly scenario during distress periods, especially in the period of COVID-19. Our systemic risk measure could forecast climate-related risk in the financial system.

Suggested Citation

  • Garcia-Jorcano, Laura & Sanchis-Marco, Lidia, 2025. "Measuring the impact of climate transition risk on the systemic risk: A multivariate quantile-located ES approach," Research in International Business and Finance, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:riibaf:v:80:y:2025:i:c:s0275531925003836
    DOI: 10.1016/j.ribaf.2025.103127
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    1. Dziwok, Ewa & Szczepaniak, Witold, 2025. "From SRISK to N-RISK: Measuring systemic risk under market, transition, and physical climate stress," Finance Research Letters, Elsevier, vol. 86(PG).

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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