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Systemic Climate Risk

Author

Listed:
  • Tristan Jourde
  • Quentin Moreaux

Abstract

This paper introduces a market-based framework to study the effects of tail climate risks in the financial sector. In addition to identifying the financial institutions most vulnerable to physical and transition climate risks, our framework explores the potential for these risks to induce contagion effects in the financial sector. Based on the securities of large European financial institutions (including the UK) spanning from 2005 to 2022, we show that, unlike physical risk, transition risk significantly and increasingly influences systemic risk in the financial sector. We also examine the potential levers available to financial institutions and regulators to address climate-related financial risk.

Suggested Citation

  • Tristan Jourde & Quentin Moreaux, 2025. "Systemic Climate Risk," Working papers 993, Banque de France.
    • Handle: RePEc:bfr:banfra:993
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    File URL: https://www.banque-france.fr/system/files/2025-06/WP993.pdf
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • 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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