國立高雄大學圖資館 |

Essays in Climate Economics and Finance /

Record Type:	Electronic resources : Monograph/item
Title/Author:	Essays in Climate Economics and Finance /Bhavyaa Sharma.
Author:	Sharma, Bhavyaa,
Description:	1 electronic resource (189 pages)
Notes:	Source: Dissertations Abstracts International, Volume: 87-01, Section: B.
Notes:	Advisors: Hale, Galina Committee members: Samaniego de la Parra, Brenda; Gu, Grace; Villacorta, Alonso.
Contained By:	Dissertations Abstracts International87-01B.
Subject:	Climate change.
Online resource:	http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=32115491
ISBN:	9798288885587

Essays in Climate Economics and Finance /
Sharma, Bhavyaa,

Essays in Climate Economics and Finance /Bhavyaa Sharma. - 1 electronic resource (189 pages)

Source: Dissertations Abstracts International, Volume: 87-01, Section: B.

This dissertation investigates how financial institutions, investors, and households make climate risk mitigation and adaptation decisions in the context of (i) lack of information about climate change and (ii) behavioral biases such as under-reaction in response to available information. Answering these questions is critical to understanding how financial markets can better address the growing risks posed by climate change and how private financing can be shifted toward decarbonization and climate adaptation efforts. Across three chapters, I explore how economic agents navigate incomplete information about climate risks and how their decision-making processes are influenced by behavioral biases with respect to climate-related physical and transition risks. I apply comprehensive empirical analysis to corporate bank lending data and household surveys, develop rigorous theoretical models of asymmetric information and disaster risk, and conduct qualitative analysis through extensive engagement with community organizations at the forefront of climate disaster management in California.In the first chapter, I examine how banks price their corporate borrowers' exposure to climate transition risk. Using data on syndicated lending to non-financial firms, firm-level emissions data, and firm-level measures of regulatory and technological aspects of climate transition risk, I find that in the E.U., firms exposed to climate transition risk face higher lending rates by banks that are specialized in their borrowers' industry. However, I also find evidence of lending rates charged to more exposed firms declining after an oil supply news shock associated with future oil price increases relevant for energy-intensive firms, especially during periods of high aggregate financial stress. This effect is visible for firms headquartered both in the U.S. and in the E.U. Interpreting bank specialization as a source of heterogeneity in costs of private information acquisition, I develop a bank lending model with competitive lending, costly information acquisition, and non-Bayesian belief updating. Through screening, specialized banks can better distinguish between borrowers' risk exposure, resulting in relatively higher lending rates to more exposed firms. However, this interest rate differential decreases in favor of more exposed borrowers if banks underreact to relevant public information. This effect is more pronounced during periods of poor average borrower quality or increased financial stress. These results imply that lowering banks' cost of acquiring firm-level transition-risk exposure information is crucial to reducing green firms' relative financing costs, even when there is high-quality public information and communication about decarbonization.The second chapter, written jointly with Galina Hale, examines how physical climate risks are priced in different asset markets. Climate-related weather events are unique in that they are drawn from a distribution that shifts and becomes more dispersed over time along an uncertain trend, making belief formation a crucial component of asset pricing. We simulate the response of asset prices to changes in the arrival rate of climate-related disasters in the context of the rare events asset pricing framework based on Gabaix (2012), in which we allow for varying degrees of climate optimism and belief rigidity. We quantify ``fully priced in'' responses to disasters in various structures of subjective belief formation. We survey the empirical literature on the pricing of physical climate risk in equity and fixed-income markets to evaluate what belief formation structures may be consistent with the assumption of fully priced-in physical climate risk. While there is no consensus in the empirical literature, our preliminary results show that in recent years, asset price responses to disasters documented in the literature are more consistent with low climate optimism and relatively low belief rigidity.The third chapter, co-authored with Teng Liu and Galina Hale, explores the determinants of household choices regarding disaster preparedness and resilience. Combining FEMA's National Household Survey with other data sources, we analyze how access to information, prior disaster experience, financial stability, and insurance availability affect household preparedness levels. We find that access to information about disaster preparedness, personal disaster experience, and access to homeowner/renter insurance and flood insurance are associated with higher subjective confidence in preparedness and the likelihood of taking resilience actions, including building a financial buffer for emergency events. We find evidence that public climate resilience projects are associated with more resilience actions for middle-income individuals, highlighting the interplay between ex-ante public adaptation and resilience investments and private adaptation behavior. We supplement this empirical analysis with a qualitative study involving nine community organizations in California. Our findings underscore the importance of targeted financial incentives and policy interventions that support rebuilding and resilience among vulnerable populations.

English

ISBN: 9798288885587Subjects--Topical Terms:

689368
Climate change.
Subjects--Index Terms:

Asset pricing

Essays in Climate Economics and Finance /
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I apply comprehensive empirical analysis to corporate bank lending data and household surveys, develop rigorous theoretical models of asymmetric information and disaster risk, and conduct qualitative analysis through extensive engagement with community organizations at the forefront of climate disaster management in California.In the first chapter, I examine how banks price their corporate borrowers' exposure to climate transition risk. Using data on syndicated lending to non-financial firms, firm-level emissions data, and firm-level measures of regulatory and technological aspects of climate transition risk, I find that in the E.U., firms exposed to climate transition risk face higher lending rates by banks that are specialized in their borrowers' industry. However, I also find evidence of lending rates charged to more exposed firms declining after an oil supply news shock associated with future oil price increases relevant for energy-intensive firms, especially during periods of high aggregate financial stress. This effect is visible for firms headquartered both in the U.S. and in the E.U. Interpreting bank specialization as a source of heterogeneity in costs of private information acquisition, I develop a bank lending model with competitive lending, costly information acquisition, and non-Bayesian belief updating. Through screening, specialized banks can better distinguish between borrowers' risk exposure, resulting in relatively higher lending rates to more exposed firms. However, this interest rate differential decreases in favor of more exposed borrowers if banks underreact to relevant public information. This effect is more pronounced during periods of poor average borrower quality or increased financial stress. These results imply that lowering banks' cost of acquiring firm-level transition-risk exposure information is crucial to reducing green firms' relative financing costs, even when there is high-quality public information and communication about decarbonization.The second chapter, written jointly with Galina Hale, examines how physical climate risks are priced in different asset markets. Climate-related weather events are unique in that they are drawn from a distribution that shifts and becomes more dispersed over time along an uncertain trend, making belief formation a crucial component of asset pricing. We simulate the response of asset prices to changes in the arrival rate of climate-related disasters in the context of the rare events asset pricing framework based on Gabaix (2012), in which we allow for varying degrees of climate optimism and belief rigidity. We quantify ``fully priced in'' responses to disasters in various structures of subjective belief formation. We survey the empirical literature on the pricing of physical climate risk in equity and fixed-income markets to evaluate what belief formation structures may be consistent with the assumption of fully priced-in physical climate risk. While there is no consensus in the empirical literature, our preliminary results show that in recent years, asset price responses to disasters documented in the literature are more consistent with low climate optimism and relatively low belief rigidity.The third chapter, co-authored with Teng Liu and Galina Hale, explores the determinants of household choices regarding disaster preparedness and resilience. Combining FEMA's National Household Survey with other data sources, we analyze how access to information, prior disaster experience, financial stability, and insurance availability affect household preparedness levels. We find that access to information about disaster preparedness, personal disaster experience, and access to homeowner/renter insurance and flood insurance are associated with higher subjective confidence in preparedness and the likelihood of taking resilience actions, including building a financial buffer for emergency events. We find evidence that public climate resilience projects are associated with more resilience actions for middle-income individuals, highlighting the interplay between ex-ante public adaptation and resilience investments and private adaptation behavior. We supplement this empirical analysis with a qualitative study involving nine community organizations in California. Our findings underscore the importance of targeted financial incentives and policy interventions that support rebuilding and resilience among vulnerable populations.
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