Journal of Financial Stability: Special Issue on Climate Risks and Financial Stability

The Journal of Financial Stability provides a respected international forum for “rigorous theoretical and empirical macro and micro economic and financial analysis of the causes, management, resolution and preventions of financial crises.” In spring 2021, the journal published a special issue including an editorial and eight papers (paywalled) that focus on how climate change impacts financial stability and filling methodological gaps to allow better analysis of the risks that climate change poses to the financial system.

This special issue includes original contributions using network modelling, dynamic evolutionary macroeconomic modelling, financial econometrics and other methodologies to analyse climate-related financial risks and their implications for financial policies and instruments aiming at the low-carbon transition.

Often highly technical, the papers curated in this special issue include (links to abstracts, highlights and paywalled papers):

• Climate sentiments, transition risk, and financial stability in a stock-flow consistent model
• How can green differentiated capital requirements affect climate risks? A dynamic macrofinancial analysis
• Three green financial policies to address climate risks
• What greenium matters in the stock market? The role of greenhouse gas emissions and environmental disclosures
• The pricing of green bonds: are financial institutions special?
• Climate risk and financial stability in the network of banks and investment funds
• Climate risks and weather derivatives: a copula-based pricing model
• High water, no marks? Biased lending after extreme weather

Climate risk is characterised by deep uncertainty, non-linearity and endogeneity that challenge traditional approaches to macroeconomic and financial risk analysis, the introductory editorial explains, suggesting that the research insights contained in this special issue can inform the decisions of central banks and financial supervisors about the integration of climate change considerations into their policies and financial risk assessment.