The Financial Transmission of a Climate Shock: El Niño and US Banks

The Financial Transmission of a Climate Shock: El Niño and US Banks

Organized by the Private Sector Development Research Network

Hosted by the International Growth Centre (IGC)
Moderated by Shubhranka Mondal, Policy Economist for the Firms Initiative, IGC.

Friday, 9th of December 2022 from 9-10am EST


The paper that will be presented during this seminar studies how a climate shock is transmitted through the financial system. The authors’ empirical strategy combines data on climate and banking with El Niño, a natural experiment producing quasi-random variation in US climate. El Niño generates heterogeneous changes in lending across counties, which aggregate at the bank level.  The authors’ findings show that supply factors induce the lending reduction and banks with lower physical capital are more resilient to El Niño. This paper offers evidence that climate shocks transmit to the financial sector in the United States. This result is particularly relevant for low and middle-income countries, since they are exposed to more severe climate shocks combined with underdeveloped financial systems, which may amplify the transmission of climate shocks.


Nicola Limodio

Assistant Professor of Finance at Bocconi University and CEPR Research Affiliate.

Professor Limodio’s research focuses on financial economics, development economics and political economy. He has been teaching an introductory course in finance to bachelor students (Financial Markets and Institutions) and a reading group in corporate finance for PhD students. Professor Limodio is also a co-founder of the WEFIDEV Workshop on Finance and Development. Click here for more info. For more details, his CV is here.

Watch full seminar here

Listen to the audio event recording here


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