Climate Risk and Financial Stability in the Network of Banks and Investment Funds

Alan Roncoroni, Stefano Battiston, Luis Onésimo Leonardo Escobar Farfàn, Serafin Martinez Jaramillo

2021 | Academic | Banks, Climate, Risk & Performance

We develop a method to analyze the effects on financial stability of the interplay between climate policy shocks and market conditions. While under mild shock scenarios systemic losses are contained, we identify the climate policy scenarios and market conditions under which systemic losses can pose a threat to financial stability.