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The effects of climate change‐related risks on banks: A literature review

Author

Listed:
  • Olivier de Bandt

    (Banque de France - Banque de France - Banque de France)

  • Laura‐chloé Kuntz

    (Deutsche Bundesbank - Deutsche Bundesbank)

  • Nora Pankratz

    (University of Toronto)

  • Fulvio Pegoraro

    (Banque de France - Banque de France - Banque de France, Banque de France - ACPR, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Haakon Solheim

    (Norges Bank)

  • Gregory Sutton

    (BIS - Bank for International Settlements)

  • Azusa Takeyama

    (Bank of Japan)

  • Fan Dora Xia

    (BIS - Bank for International Settlements)

Abstract

This literature review describes the recent empirical literature in economics and finance focusing on how climate change‐related risks affect banks, with a particular emphasis on microeconomic evidence. The comparison of empirical estimates shows that many studies project limited estimates of damages for banks. For both loan and bond spreads, most estimates of the effect of climate change are below 50 bp. In comparison, studies on stock markets document responses that are more substantial. In real estate markets, there is evidence of price effects notably for flood risks associated with sea level rise. However, some studies indicate that climate risks could be underestimated. We note challenges related to the measurement of adaptation potential, non‐linear changes in hazards and responses, and the aggregation of effects across studies, markets, and bank portfolios.

Suggested Citation

  • Olivier de Bandt & Laura‐chloé Kuntz & Nora Pankratz & Fulvio Pegoraro & Haakon Solheim & Gregory Sutton & Azusa Takeyama & Fan Dora Xia, 2024. "The effects of climate change‐related risks on banks: A literature review," Post-Print halshs-04948450, HAL.
    • Handle: RePEc:hal:journl:halshs-04948450
    DOI: 10.1111/joes.12665
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    Cited by:

    1. Rega, Federico Giovanni & Russo, Simona & Salerno, Dario, 2025. "Disentangling the S and the G in the European banking industry: The role of climate risk and opportunity awareness," Research in International Business and Finance, Elsevier, vol. 77(PB).
    2. Tao, Miaomiao & Che, Shuai & Klein, Tony, 2026. "Climate risk exposure and banking competition: Evidence from China’s listed banks," Finance Research Letters, Elsevier, vol. 88(C).
    3. Chen, Yujia & Ding, Zhenghong & Barbaglia, Luca & Calabrese, Raffaella & Fatica, Serena, 2026. "A climate stress testing exercise on loans to European small and medium enterprises," Energy Economics, Elsevier, vol. 155(C).
    4. Adriano Bellinvia & Paola Brighi & Valeria Venturelli, 2026. "Banks and climate risk: a bibliometric review and policy perspective," Journal of Banking Regulation, Palgrave Macmillan, vol. 27(2), pages 1-29, June.
    5. Silva, Thiago Christiano & Wilhelm, Paulo Victor Berri & Guerra, Solange Maria & Tabak, Benjamin Miranda, 2025. "Extreme weather and firm borrowing: Evidence from Brazil," Finance Research Letters, Elsevier, vol. 86(PG).
    6. Chen, Sichong & Xu, Qiyuan & Zeng, Jingjing & Zhao, Yunfeng, 2025. "Ark amidst floods: Evidence from personal credit at a Chinese bank," International Review of Financial Analysis, Elsevier, vol. 106(C).
    7. Roberto Panzica & Ｍartín Saldias, 2025. "Uncovering transition risk: A new stress testing approach for the banking sector," Working Papers w202520, Banco de Portugal, Economics and Research Department.
    8. D’Orazio, Paola, 2025. "Climate risks and financial stability: Evidence on the effectiveness of climate-related financial policies," International Review of Financial Analysis, Elsevier, vol. 105(C).
    9. Albanese, Marina & Caporale, Guglielmo Maria & Colella, Ida & Spagnolo, Nicola, 2026. "Climate policies, energy shocks and spillovers between green and brown stock price indices," International Review of Economics & Finance, Elsevier, vol. 106(C).
    10. Tabea Brüggemann & Rainer Lueg, 2026. "Bank Responses to Physical and Transition Risks in Lending: A Diagnostic Framework From a Systematic Literature Review," Business Strategy and the Environment, Wiley Blackwell, vol. 35(1), pages 195-212, January.
    11. Delis, Manthos & Iosifidi, Maria, 2025. "Green Lending," MPRA Paper 125118, University Library of Munich, Germany.
    12. Pacelli, Vincenzo & Foglia, Matteo & Mariano, Dayana, 2025. "The link between climate and systemic risk: A bibliometric and systematic literature review," Research in International Business and Finance, Elsevier, vol. 79(C).
    13. Petre Caraiani & Onur Polat & Rangan Gupta & Elie Bouri, 2025. "Climate Risks and Predictability of Financial Risks in the US Banking Sector," Working Papers 202507, University of Pretoria, Department of Economics.
    14. Zhang, Le & Shang, Longwen & Huang, Min, 2026. "Commercial paper digitisation and corporate debt default risk:Evidence and mechanism from China," Finance Research Letters, Elsevier, vol. 87(C).
    15. Alves, José & Menescal, Lucas, 2025. "Green finance under fire: Navigating financial and geopolitical risk through climate adaptation strategies," Finance Research Letters, Elsevier, vol. 85(PC).
    16. Grinstein, Yaniv & Larkin, Yelena, 2025. "Corporate environmental footprint and product market competition," Journal of Financial Intermediation, Elsevier, vol. 64(C).
    17. Tachy, Marcelo Martins & Vasconcelos, Gláucia Fernandes & dos Santos Mendes, Layla, 2026. "A global assessment of banks’ capacity to support the energy transition: Evidence from developed and emerging markets," Journal of International Money and Finance, Elsevier, vol. 160(C).
    18. Valerio Brescia & Ginevra Degregori & Federico Chmet & Silvana Secinaro, 2026. "Climate‐Related Disclosure in European Banking: Stakeholder Capitalism Between Sustainability and Financial Imperatives," Business Strategy and the Environment, Wiley Blackwell, vol. 35(1), pages 36-56, January.
    19. Alkatheeri, Hanan & Mertzanis, Charilaos & Kampouris, Ilias, 2026. "Climate laws and financial stability," Research in International Business and Finance, Elsevier, vol. 81(C).
    20. Kempa, Karol, 2026. "Physical climate risk and the pricing of bank loans," Journal of Environmental Economics and Management, Elsevier, vol. 137(C).

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