IDEAS home Printed from https://ideas.repec.org/p/rbz/wpaper/11085.html
   My bibliography  Save this paper

Climaterelated transition risks in Southern African banks financial exposure and policy implications

Author

Listed:
  • Paola DOrazio
  • Torsten Schmidt
  • Maximilian Dirks

Abstract

This paper investigates climate-related transition risks in the financial sectors of Botswana, Namibia, Mozambique and South Africa, focusing on exposure to carbon-intensive industries and the macrofinancial transmission of transition shocks. Drawing on sectoral loan allocation data, greenhouse gas emissions and transition risk metrics, the analysis applies the Climate Policy Relevant Sectors taxonomy, loan carbon intensity and a transition risk index to quantify financial sector vulnerabilities across the four economies. To assess the macrofinancial effects of transition risk shocks, a set of country-specific Bayesian vector autoregression models is estimated. The results reveal heterogeneous responses: while transition shocks lead to current account deterioration in Namibia and South Africa, trade volumes show resilience or expansion, particularly in Botswana. Credit supply and non-performing loans respond only modestly, with financial sector effects remaining limited and sensitive to identification strategies. The findings underscore the importance of integrating transition risk into financial supervisory frameworks. Enhancing climate-related prudential regulation through improved risk disclosure, stress testing and capital requirements for high-carbon exposures can strengthen financial system resilience and facilitate the reallocation of capital towards low-emission sectors. Aligning domestic regulatory practices with international climate finance standards will be essential to mitigate systemic risks and ensure stability during the transition to a low-carbon economy.

Suggested Citation

  • Paola DOrazio & Torsten Schmidt & Maximilian Dirks, 2025. "Climaterelated transition risks in Southern African banks financial exposure and policy implications," Working Papers 11085, South African Reserve Bank.
  • Handle: RePEc:rbz:wpaper:11085
    as

    Download full text from publisher

    File URL: https://www.resbank.co.za/content/dam/sarb/publications/working-papers/2025/climate-related-transition-risks-in-southern-african-banks-financial-exposure-and-policy-implications.pdf
    File Function: Revision
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rbz:wpaper:11085. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jessica VanWyk (email available below). General contact details of provider: https://edirc.repec.org/data/rbagvza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.