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A climate stress testing exercise on loans to European small and medium enterprises

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"This paper assesses the impact of floods on credit to European small and medium-sized enterprises (SMEs) using a discrete-time survival model. We find a statistically significant relationship between the default probability of loans to SMEs and floods occurring in the region where the firm is located. We propose a micro-level stress testing exercise to assess the performance of small business loans under different climate scenarios.Our results allow us to identify the European regions with heightened vulnerability under a stressed climate scenario and to quantify the impacts upon individual firms in terms of increases in loan default probability."

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  • Chen Yujia & Ding Zhenghong & Barbaglia Luca & Calabrese Raffaella & Fatica Serena, 2025. "A climate stress testing exercise on loans to European small and medium enterprises," JRC Working Papers in Economics and Finance 2025-06, Joint Research Centre, European Commission.
    • Handle: RePEc:jrs:wpaper:202506
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    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC142464
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