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Climate transition risk stress test for the German financial system

Author

Listed:
  • Frankovic, Ivan
  • Etzel, Tobias
  • Falter, Alexander
  • Gross, Christian
  • Ohls, Jana
  • Strobel, Lena
  • Wilke, Hannes

Abstract

This paper presents the methodology applied in the Deutsche Bundesbank's climate transition stress test for the German financial system, see Deutsche Bundesbank (2023). It discusses the construction of the transition scenarios underlying the analysis, including a long-run orderly scenario and a more disruptive short-term carbon price shock. Furthermore, the document shows the methodology for translating scenario impacts onto the asset level, which includes the consideration of firm-level carbon emission data where available. Finally, the impacts on the balance sheets of German banks, funds and insurers are discussed.

Suggested Citation

  • Frankovic, Ivan & Etzel, Tobias & Falter, Alexander & Gross, Christian & Ohls, Jana & Strobel, Lena & Wilke, Hannes, 2023. "Climate transition risk stress test for the German financial system," Technical Papers 04/2023, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubtps:283347
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    File URL: https://www.econstor.eu/bitstream/10419/283347/1/technical-paper-2023-04.pdf
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    References listed on IDEAS

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    1. Frankovic, Ivan & Kolb, Benedikt, 2024. "The role of emission disclosure for the low-carbon transition," European Economic Review, Elsevier, vol. 167(C).
    2. Mr. Thierry Tressel & Xiaodan Ding, 2021. "Global Corporate Stress Tests—Impact of the COVID-19 Pandemic and Policy Responses," IMF Working Papers 2021/212, International Monetary Fund.
    3. Lilas Demmou & Sara Calligaris & Guido Franco & Dennis Dlugosch & Müge Adalet McGowan & Sahra Sakha, 2021. "Insolvency and debt overhang following the COVID-19 outbreak: Assessment of risks and policy responses," OECD Economics Department Working Papers 1651, OECD Publishing.
    4. Frankovic, Ivan, 2022. "The impact of carbon pricing in a multi-region production network model and an application to climate scenarios," Discussion Papers 07/2022, Deutsche Bundesbank.
    5. Antoine Devulder & Noémie Lisack, 2020. "Carbon Tax in a Production Network: Propagation and Sectoral Incidence," Working papers 760, Banque de France.
    6. Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
    7. David Rezza Baqaee & Emmanuel Farhi, 2019. "The Macroeconomic Impact of Microeconomic Shocks: Beyond Hulten's Theorem," Econometrica, Econometric Society, vol. 87(4), pages 1155-1203, July.
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    Cited by:

    1. Gross, Christian & Kuntz, Laura-Chloé & Niederauer, Simon & Strobel, Lena & Zwanzger, Joachim, 2025. "Climate stress test for the German banking sector: Impact of the green transition on corporate loan portfolios," Discussion Papers 11/2025, Deutsche Bundesbank.

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    Keywords

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    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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