Seminar (Dept. of Finance)

Title: The Impact of Climate Change on Rural Credit Risks

Speaker: Junjie Zhang, Direct of the Initiative for Sustainable Investment, Duke Kunshan University

Time: 10:00-11:30, Oct 22, 2024(Tuesday)

Venue: Room 1008, Mingde Business Building

Language: English/Chinese

ABSTRACT:

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.