Climate transition risk and bank performance:Evidence from China

Abstract

Under the "carbon peaking and carbon neutrality goals", China's commercial banks are facing a severe climate transition risk. This paper proposes a climate transition risk measurement method for commercial banks, and investigates the impact of climate transition risk on bank performance based on the data of 490 commercial banks in China from 2008 to 2019. The empirical findings are as follows: firstly, the climate transition risk has an inhibitory effect on the performance of commercial banks, and the inhibitory effect weakens with the increase of bank size. Secondly, the signing of the Paris Agreement and the increase of the economic policy uncertainty in China have a positive moderating effect, which weakens the inhibitory effect of the climate transition risk. Finally, the climate transition risk inhibits the performance of commercial banks partly by reducing the scale of bank loans.

Keywords: Climate transition risk; Commercial bank; Mediation effect; Moderating effect; Performance.