Review of Corporate Finance > Vol 4 > Issue 1–2

Measuring European Banks’ Exposure To Climate Risk

Gianandrea Giacchetta, Università degli Studi di Bergamo and Università degli Studi di Pavia, Italy, , Rosella Giacometti, Università degli Studi di Bergamo, Italy,
Suggested Citation
Gianandrea Giacchetta and Rosella Giacometti (2024), "Measuring European Banks’ Exposure To Climate Risk", Review of Corporate Finance: Vol. 4: No. 1–2, pp 151-176.

Publication Date: 18 Apr 2024
© 2024 G. Giacchetta and R. Giacometti
Econometric models,  Environmental economics,  Climate change,  Financial markets
JEL Codes: C50, G21
Transition riskGJR-GARCHsystemic risk


Download article
In this article:
Results for European Banks’ CRISK 
Catching the Climate Premium 


We investigate the impact of climate transition risk on the European financial system, evaluating the expected capital shortfall of the major European banks in a climate stress scenario. Following the methodology proposed by Jung et al. [(2021). “Climate stress testing”. FRB of New York Staff Report. (977).], we measure the dynamic transition risk betas and compare them to the non financial corporate loans exposure, obtained from EBA, of each bank towards the energy sector. Furthermore, we estimate the dynamic risk premium associated with the selected climate transition risk factor in order to explain and eventually exploit stock market anomalies. Finally we estimate the countries’ exposures and we find that at the end of 2022, aggregated European CRISK can be quantified in about EUR 165 bn. As far as the climate premium is concerned, we find evidence of a dynamic climate risk premium negatively correlated to transition risk exposure.



Review of Corporate Finance, Volume 4, Issue 1–2 Special Issue on Sustainable and Climate Finance: Articles Overiew
See the other articles that are part of this special issue.