A climate stress-test of the financial system
Stefano Battiston
(1, 2)
,
Antoine Mandel
(3, 4)
,
Irene Monasterolo
(5)
,
Franziska Schütze
(6)
,
Gabriele Visentin
(2)
Stefano Battiston
- Fonction : Auteur
- PersonId : 828680
Antoine Mandel
- Fonction : Auteur
- PersonId : 13007
- IdHAL : antoine-mandel
- ORCID : 0000-0001-7180-950X
- IdRef : 117013714
Résumé
The urgency of estimating the impact of climate risks on the financial system is increasingly recognized among scholars and practitioners. By adopting a network approach to financial dependencies, we look at how climate policy risk might propagate through the financial system. We develop a network-based climate stress-test methodology and apply it to large Euro Area banks in a ‘green’ and a ‘brown’ scenario. We find that direct and indirect exposures to climate-policy-relevant sectors represent a large portion of investors’ equity portfolios, especially for investment and pension funds. Additionally, the portion of banks’ loan portfolios exposed to these sectors is comparable to banks’ capital. Our results suggest that climate policy timing matters. An early and stable policy framework would allow for smooth asset value adjustments and lead to potential net winners and losers. In contrast, a late and abrupt policy framework could have adverse systemic consequences.
Domaines
Economies et financesFormat du dépôt | Notice |
---|---|
Type de dépôt | Article dans une revue |
Titre |
en
A climate stress-test of the financial system
|
Résumé |
en
The urgency of estimating the impact of climate risks on the financial system is increasingly recognized among scholars and practitioners. By adopting a network approach to financial dependencies, we look at how climate policy risk might propagate through the financial system. We develop a network-based climate stress-test methodology and apply it to large Euro Area banks in a ‘green’ and a ‘brown’ scenario. We find that direct and indirect exposures to climate-policy-relevant sectors represent a large portion of investors’ equity portfolios, especially for investment and pension funds. Additionally, the portion of banks’ loan portfolios exposed to these sectors is comparable to banks’ capital. Our results suggest that climate policy timing matters. An early and stable policy framework would allow for smooth asset value adjustments and lead to potential net winners and losers. In contrast, a late and abrupt policy framework could have adverse systemic consequences.
|
Auteur(s) |
Stefano Battiston
1, 2
, Antoine Mandel
3, 4
, Irene Monasterolo
5
, Franziska Schütze
6
, Gabriele Visentin
2
1
CAMS -
Centre d'Analyse et de Mathématique sociales
( 1318 )
- 54 boulevard Raspail 75006 Paris
- France
2
Department of Banking and Finance
( 267698 )
- University of Zurich,
Andreasstr. 15,
8050 Zürich,
Switzerland
- Suisse
3
CES -
Centre d'économie de la Sorbonne
( 15080 )
- Maison des Sciences Économiques - 106-112 Boulevard de l'Hôpital - 75647 Paris Cedex 13
- France
4
PSE -
Paris School of Economics
( 301309 )
- 48 boulevard Jourdan 75014 Paris
- France
5
Frederick S. Pardee Center for the Study of the Longer-Range Future
( 545843 )
- Boston University
67 Bay State Road,
Boston, Massachusetts 02215,
USA
- États-Unis
6
Global Climate Forum
( 483116 )
- Berlin Germany
- Allemagne
|
Volume |
7
|
Numéro |
4
|
Page/Identifiant |
283-288
|
Commentaire |
The authors would like to thank J. E. Stiglitz and A. C. Janetos for fruitful comments on an early version of the paper, M. D’Errico for precious suggestions on macro-network data from the ECB Data Warehouse, and J. Glattfelder for help on equity holdings data extraction from Orbis. We also would like to thank A. Barkawi, P. Monnin and M. Tanaka for their comments during the Bank of England conference on Climate Change and Central Banking. S.B. acknowledges financial support from the Swiss National Fund Professorship grant no. PP00P1-144689. All the authors acknowledge the support of the European Projects Future and Emerging Technologies (FET) SIMPOL (grant no. 610704) and DOLFINS (grant no. 640772), and the European Project SEI Metrics (grant no. 649982).
|
Langue du document |
Anglais
|
Nom de la revue |
|
Vulgarisation |
Non
|
Comité de lecture |
Oui
|
Audience |
Internationale
|
Date de publication |
2017-03-27
|
Projet(s) Européen(s) |
|
Domaine(s) |
|
Mots-clés |
en
Business, Governance
|
DOI | 10.1038/nclimate3255 |
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