Shocks to Transition Risk

64 Pages Posted: 17 Mar 2023

See all articles by Christoph Meinerding

Christoph Meinerding

Deutsche Bundesbank

Yves S. Schüler

Deutsche Bundesbank

Philipp Zhang

University of Zurich - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 2023

Abstract

We propose and implement a method to identify shocks to transition risk, addressing key challenges regarding its definition and measurement. Our shocks are instances where significant new information about the economic relevance of climate change increases the valuation of green firms over brown firms. To illustrate our method, we identify shocks to transition risk in the United States. These shocks have important aggregate effects, also inducing financial instability. They are associated with events that increase the likelihood of an orderly transition, and they specifically affect parts of the economy related to fossil fuels and energy. We show that these main results carry over to Germany and the United Kingdom. Still, we find an important role for country specificities.

Keywords: Transition risk, climate change, financial stability, portfolio sort, tex-tual analysis

JEL Classification: C30, E44, G12, Q43, Q54, Q58

Suggested Citation

Meinerding, Christoph and Schüler, Yves S. and Zhang, Philipp, Shocks to Transition Risk (2023). Deutsche Bundesbank Discussion Paper No. 04/2023, Available at SSRN: https://ssrn.com/abstract=4391260 or http://dx.doi.org/10.2139/ssrn.4391260

Christoph Meinerding (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Yves S. Schüler

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Philipp Zhang

University of Zurich - Department of Economics ( email )

Zurich
Switzerland

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