The impact of climate risk on credit supply to private and public sectors: an empirical analysis of 174 countries

In recent years, risk has been increasingly a long-term environmental problem that cannot be underestimated due to its tremendous impacts on various sectors including banking sector. Accordingly, the credit supply to private and public sectors is affected by the increased climate risk. In order to examine the climate risk effect from an international comparison, this paper empirically investigates the impact of climate risk on credit supply by using a sample of 174 countries during 2000–2019 from the perspective of the difference between private and public sectors. The results show that climate risk has a significant negative effect on the credit supply to private sector and a positive effect on that to the public sector. Further, we provide new evidence that the climate risk effect has a more significant effect on the private and public sector credit supply in the high-income countries than that in the low-income countries, suggesting a quick risk contagion in the high-income countries.