Climate change heightens conventional financial risks for the banking system, especially for those commercial banks specializing in rural finance. Taking advantage of a unique dataset with 13 million agriculture loan records from a Chinese bank, we evaluate the impact of climate change on credit quality. We comprehensively evaluate how physical risks, including heat waves, frost, flooding, winds, and drought, can negatively impact rural credit quality. Our preliminary results show that, with one more day of over 35 degrees per year, the amount of overdue principal and interest will increase by 2.02% and 3.49%, respectively. Moreover, we conduct climate pressure testing based on the simulation results of various climate models. The result shows that shifting temperature patterns are the leading force in the default of rural loans.
Junjie Zhang is a professor in the Nicholas School of the Environment at Duke University and Director of the Initiative for Sustainable Investment at Duke Kunshan University. He founded and directed Duke Kunshan's Environmental Research Center and International Master of Environmental Policy Program. Before that, he was an associate professor in the School of Global Policy and Strategy at the University of California, San Diego. He was also a Volkswagen Visiting Chair in Sustainability in Schwarzman College at Tsinghua University. His recent research focuses on empirical issues in energy transition, climate change, and green finance. He has received funding from reputable sources, including the U.S. National Science Foundation, the U.S. National Oceanic and Atmospheric Administration, China National Natural Science Foundation, China’s Ministry of Ecology and Environment, China Council for International Cooperation on Environment and Development, the Energy Foundation, the World Bank, and Asian Development Bank. He holds a B.S. from the Renmin University of China, a B.S. and an M.S. from Tsinghua University, and a Ph.D. from Duke University.
Host: Prof Yatang LIN (Department of Economics), Prof Deyu RAO (Department of Economics), Prof Wen WANG (Division of Social Science), Prof Zoey Yiyuan ZHOU (Division of Environment & Sustainability), HKUST
Meeting ID: 979 8911 4421
Passcode: 716018