Financial Crises and Climate Change

Abstract

Climate change is a big challenge of our time. While there is a bourgeoning literature on the economic impact of climate change, research on how financial crises affect climate change is limited. We empirically use the local projection method to empirically study the impact of past financial crises on climate change vulnerability and resilience indices. Using a dataset covering 178 countries over the period 1995–2019, we observe that resilience to climate change shocks has been increasing and that advanced economies are the least vulnerable. Our econometric results suggest that financial crises (particularly systematic banking ones) tend to lead to a short-run deterioration in a country’s resilience to climate change. This effect is more pronounced in developing economies. In downturns, if an economy is hit by a financial crisis, vulnerability to climate change increases.

The linkage between global financial crises, corporate social responsibility and climate change: unearthing research opportunities through bibliometric reviews

“…Despite the importance of integrating GFC, CSR, and climate change, there is a scarcity of research on the integration of these concepts. For example, Jalles (2023) stated that the research on the impact of financial crises on climate change vulnerability and resilience indices is limited. Additionally, the analysis of the relationship between economic crises and CSR initiatives has been conducted separately, resulting in a gap between the two (Roman Pais Seles et al, 2018).…”

“…Additionally, the impact of financial crises on climate change vulnerability and resilience indices is explored, revealing that such crises can result in a temporary deterioration in a country's resilience to climate change, particularly in developing economies (Mandal, 2022). Furthermore, the relationship between CSR and climate risk is examined, showing that companies in countries with higher climate risks participate in more CSR initiatives, and that higher CSR reduces the impact of climate risk on performance, particularly in countries with high levels of religiosity and low levels of individualism (Jalles, 2023). Moreover, firms adjust their CSR standards upwards in response to climate change risk shocks, and the sensitivity of CSR performance to climate change risk increases after significant events such as the Stern Review and the Paris Agreement (Ozkan et al, 2022).…”