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Climate change and bank stability: The moderating role of green financing and renewable energy consumption in ASEAN

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  • Kamran, Hafiz Waqas
  • Haseeb, Muhammad
  • Nguyen, Thu Thuy
  • Nguyen, V.C.

Abstract

The present investigation empirically determines the comparative as well as combine panel estimations for the relationship between climate change and bank stability in three selected ASEAN countries; Malaysia, Indonesia and Thailand with the moderation of green financing and renewable energy. Five leading banks were chosen from each country based on green financing usage. The dependent variable was bank stability, which was proxies by z-score of ROA and ROE along with SDROA and SDROE. Climate change was the main independent variable, which was proxies by CO2 emission while the control variable was organization quality. Panel data estimation was applied using a fixed effect, random effect and pooled OLS technique along with the Hausman test and LM test. Both Hausman and LM tests were not significant which conformed pooled data estimation as the appropriate modelling. The comparative findings indicate that bank stability strongly decreased by climate change in Malaysia, Indonesia and Thailand. The Green financing strongly enhances bank stability in the case of Malaysia and Thailand while renewable energy is a less important factor to enhance the bank stability for all the three countries. The moderation effect of green financing significantly enhances bank stability in the case of Malaysia and Thailand while the moderation effect of renewable energy enhances bank stability in the case of Malaysia and Indonesia only. The combined estimates conclude that climate changes strongly decreases the bank stability in the ASEAN region while the green financing and renewable energy positively influences the bank stability in this region with low significance. The moderation effect of green financing, as well as renewable energy positively, enhances the bank stability measures of ZROA and ZROE only in this region. The policy implication for this empirical investigation concludes that the policymakers in ASEAN region should promote green financing in all the banks with renewable energy in their economies as the source of alternative energy consumption to control to devastating changes in climate so that bank stability in this region is insured.

Suggested Citation

  • Kamran, Hafiz Waqas & Haseeb, Muhammad & Nguyen, Thu Thuy & Nguyen, V.C., 2020. "Climate change and bank stability: The moderating role of green financing and renewable energy consumption in ASEAN," OSF Preprints v48fa, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:v48fa
    DOI: 10.31219/osf.io/v48fa
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    2. Maman Suratman & Nurazilah Zainal, 2021. "Social Development from Nuclear and Other Energy: A Myth or Reality from Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 114-121.
    3. Dao, Kieu Oanh & Nguyen, V.C. & Dinh, Si Tri Nhan, 2020. "Real Effective Exchange Rate, Broad Money Supply, and Trade Balance in Vietnam: An Empirical Analysis from Bounds Test to a Cointegration Approach," OSF Preprints ze89s, Center for Open Science.
    4. Melyana R. Pugu & Yanyan M. Yani & Wawan B. Dharmawan & Velix V. Wanggai & Zuhaina Zakaria, 2021. "Electricity Production, Energy Consumption and Capital Formation: Analyzing the Footprints in Indonesia," International Journal of Energy Economics and Policy, Econjournals, vol. 11(6), pages 145-151.
    5. Shangram Bahadur Shah & Jirakiattikul Sopin & Kua-Anan Techato & Bibek Kumar Mudbhari, 2023. "A Systematic Review on Nexus Between Green Finance and Climate Change: Evidence from China and India," International Journal of Energy Economics and Policy, Econjournals, vol. 13(4), pages 599-613, July.
    6. Lee, Chien-Chiang & Wang, Chih-Wei & Hong, Pei-Hsuan & Lin, Weizheng, 2024. "Environmental policy stringency and bank risks: Does green economy matter?," International Review of Financial Analysis, Elsevier, vol. 91(C).
    7. Zuyao Wang & Runguo Xu, 2024. "Nexus of Natural Resources, Renewable Energy, Capital Formation, Urbanization, and Foreign Investment in E7 Countries," Sustainability, MDPI, vol. 16(24), pages 1-22, December.

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