Climate risk and financial stability: evidence from syndicated lending

Figures & data

Figure 1. Cumulative losses (USD bn) of climate risk events 1980–2020.

Figure 2. Cumulative frequency of climate risk events 1980–2020.

Table 1. Sample selection for climate risk measurement.

	# of lender banks	# of borrower firms	# of bank share observations
Initial Dealscan sample	10,428	73,430	1,747,705
1. Removing deals that are ‘canceled’, ‘suspended’, or ‘rumour’.	10,402	73,074	1,739,874
2. Excluding deals with missing lender share information.	5218	32,272	410,904
3. Excluding deals with inaccurate lender share information.	5164	31,828	396,647
4. Excluding loans made by non-US banks or loans made to non-US firms or financial firms.	571	6524	54,642

This table presents the sample selection procedure undertaken for measuring climate risk.

Figure 3. Scree plot of eigenvalues after PCA.

Table 2. Principal component analysis results.

Component	Eigenvalues	Percentage of variance
1	2.802	0.467
2	1.428	0.238
3	0.917	0.153
4	0.630	0.105
5	0.121	0.020
6	0.103	0.017

This table reports the eigenvalues and the proportion of the variance explained by the six components.

Table 3. Sample composition.

Year	Frequency	Percent	Cumulative
Panel A. Sample Composition by Year
1999	677	5.58	5.58
2000	640	5.27	10.85
2001	691	5.69	16.54
2002	687	5.66	22.20
2003	761	6.27	28.46
2004	807	6.65	35.11
2005	874	7.20	42.31
2006	622	5.12	47.43
2007	555	4.57	52.00
2008	282	2.32	54.32
2009	325	2.68	57.00
2010	722	5.95	62.95
2011	840	6.92	69.86
2012	766	6.31	76.17
2013	602	4.96	81.13
2014	556	4.58	85.71
2015	685	5.64	91.35
2016	492	4.05	95.40
2017	185	1.52	96.93
2018	197	1.62	98.55
2019	176	1.45	100.00
Total	12,142	100.00
State	Frequency	Percent	Cumulative
Panel B. Sample Composition by Lender State
Alabama	271	2.23	2.23
California	1,086	8.94	11.18
Connecticut	38	0.31	11.49
Georgia	836	6.89	18.37
Hawaii	20	0.16	18.54
Illinois	925	7.62	26.16
Louisiana	47	0.39	26.54
Massachusetts	195	1.61	28.15
Minnesota	1,393	11.47	39.62
Mississippi	6	0.05	39.67
New Jersey	23	0.19	39.86
New York	2,206	18.17	58.03
North Carolina	2,167	17.85	75.88
Ohio	1,353	11.14	87.02
Pennsylvania	1,051	8.66	95.68
Rhode Island	25	0.21	95.88
Texas	407	3.35	99.23
Utah	49	0.40	99.64
Wisconsin	44	0.36	100.00
Total	12,142	100.00
Panel C. Sample Composition by Borrower State
Alabama	62	0.51	0.51
Arizona	243	2.00	2.51
Arkansas	98	0.81	3.32
California	592	4.88	8.19
Colorado	237	1.95	10.15
Connecticut	208	1.71	11.86
Delaware	44	0.36	12.22
District of Columbia	107	0.88	13.10
Florida	557	4.59	17.69
Georgia	388	3.20	20.89
Idaho	74	0.61	21.50
Illinois	797	6.56	28.06
Indiana	192	1.58	29.64
Iowa	28	0.23	29.87
Kansas	61	0.50	30.37
Kentucky	205	1.69	32.06
Louisiana	95	0.78	32.84
Maryland	160	1.32	34.16
Massachusetts	304	2.50	36.67
Michigan	459	3.78	40.45
Minnesota	409	3.37	43.81
Mississippi	11	0.09	43.91
Missouri	496	4.08	47.99
Montana	7	0.06	48.05
Nebraska	56	0.46	48.51
Nevada	61	0.50	49.01
New Hampshire	18	0.15	49.16
New Jersey	342	2.82	51.98
New Mexico	12	0.10	52.08
New York	631	5.20	57.27
North Carolina	291	2.40	59.67
North Dakota	12	0.10	59.77
Ohio	761	6.27	66.04
Oklahoma	193	1.59	67.62
Oregon	103	0.85	68.47
Pennsylvania	605	4.98	73.46
Rhode Island	99	0.82	74.27
South Carolina	63	0.52	74.79
South Dakota	33	0.27	75.06
Tennessee	480	3.95	79.01
Texas	1,620	13.34	92.36
Utah	28	0.23	92.59
Vermont	5	0.04	92.63
Virginia	391	3.22	95.85
Washington	170	1.40	97.25
West Virginia	5	0.04	97.29
Wisconsin	329	2.71	100.00
Total	12,142	100.00

This table reports the sample composition. Panel A reports the sample composition by year. Panel B reports the sample composition by lender bank state. Panel C reports the sample composition by borrower firm state.

Table 4. Descriptive statistics.

	N	Mean	S.D.	Min	Median	Max
−MES	12,142	3.35	2.20	0.57	2.97	14.65
−LRMES	12,142	0.48	0.18	0.04	0.48	0.97
−VaR5	12,142	2.65	0.84	1.18	2.47	7.36
−VaR1	12,142	4.43	1.34	2.19	4.11	14.12
$-\mathrm{\Delta }$CoVaR5	12,142	0.87	0.32	0.26	0.84	2.43
$-\mathrm{\Delta }$CoVaR1	12,142	0.78	0.45	0.17	0.70	3.18
CRI_Bank_Cross	12,142	−24.30	9.61	−37.16	−26.79	0.00
CRI_Bank_Home	12,142	−26.39	13.62	−49.00	−28.00	0.00
SIZE_Bank	12,142	12.44	1.29	8.69	12.30	14.67
EQRAT_Bank	12,142	0.09	0.02	0.04	0.09	0.13
MTB_Bank	12,142	1.59	0.76	0.39	1.52	4.11
DEPO_Bank	12,142	0.63	0.10	0.28	0.65	0.86
LTA_Bank	12,142	0.51	0.14	0.12	0.55	0.77
NPL_Bank	12,142	0.01	0.01	0.00	0.00	0.03
NII_Bank	12,142	0.03	0.01	0.01	0.02	0.07
ROA_Bank	12,142	0.01	0.01	−0.01	0.01	0.02
GDP_Bank	12,142	10.76	0.20	10.10	10.75	11.23
ΔGDP_Bank	12,142	0.03	0.02	−0.03	0.04	0.10
SIZE_Borrower	12,142	8.08	1.65	2.56	8.06	11.74
COVER_Borrower	12,142	20.29	41.28	−6.96	8.78	284.68
DEBT_Borrower	12,142	2.44	2.37	−7.04	2.02	16.54
CURRENT_Borrower	12,142	0.41	0.33	0.00	0.33	2.16
GDP_Borrower	12,142	10.73	0.22	10.13	10.71	11.28
ΔGDP_Borrower	12,142	0.04	0.02	−0.03	0.04	0.10

This table presents descriptive statistics of the variables studied. N refers to the number of observations. S.D. is the standard deviation. Min and Max refer to the minimum and maximum values, respectively. Variables are defined in Appendix 1.

Table 5. Correlation.

	CRI_Bank_Cross	CRI_Bank_Home	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Correlation Between Climate Risk and Systemic Risk Measures
CRI_Bank_Cross	1
CRI_Bank_Home	−0.088${}^{\ast \ast \ast }$	1
−MES	0.102${}^{\ast \ast \ast }$	−0.051${}^{\ast \ast \ast }$	1
−LRMES	0.151${}^{\ast \ast \ast }$	−0.022${}^{\ast }$	0.909${}^{\ast \ast \ast }$	1
−VaR5	0.371${}^{\ast \ast \ast }$	−0.060${}^{\ast \ast \ast }$	0.777${}^{\ast \ast \ast }$	0.741${}^{\ast \ast \ast }$	1
−VaR1	0.278${}^{\ast \ast \ast }$	−0.069${}^{\ast \ast \ast }$	0.710${}^{\ast \ast \ast }$	0.683${}^{\ast \ast \ast }$	0.894${}^{\ast \ast \ast }$	1
$-\mathrm{\Delta }$CoVaR5	0.269${}^{\ast \ast \ast }$	−0.161${}^{\ast \ast \ast }$	0.560${}^{\ast \ast \ast }$	0.558${}^{\ast \ast \ast }$	0.660${}^{\ast \ast \ast }$	0.540${}^{\ast \ast \ast }$	1
$-\mathrm{\Delta }$CoVaR1	0.205${}^{\ast \ast \ast }$	−0.136${}^{\ast \ast \ast }$	0.249${}^{\ast \ast \ast }$	0.285${}^{\ast \ast \ast }$	0.333${}^{\ast \ast \ast }$	0.276${}^{\ast \ast \ast }$	0.780${}^{\ast \ast \ast }$	1
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)
Panel B. Correlation Between Climate Risk and Control Variables
(1) CRI_Bank_Cross	1
(2) CRI_Bank_Home	−0.088${}^{\ast \ast \ast }$	1
(3) SIZE_Bank	−0.220${}^{\ast \ast \ast }$	0.037${}^{\ast \ast \ast }$	1
(4) EQRAT_Bank	−0.284${}^{\ast \ast \ast }$	0.080${}^{\ast \ast \ast }$	−0.037${}^{\ast \ast \ast }$	1
(5) MTB_Bank	0.400${}^{\ast \ast \ast }$	−0.001	−0.474${}^{\ast \ast \ast }$	−0.362${}^{\ast \ast \ast }$	1
(6) DEPO_Bank	−0.018${}^{\ast }$	0.037${}^{\ast \ast \ast }$	−0.640${}^{\ast \ast \ast }$	0.359${}^{\ast \ast \ast }$	0.160${}^{\ast \ast \ast }$	1
(7) LTA_Bank	0.110${}^{\ast \ast \ast }$	0.056${}^{\ast \ast \ast }$	−0.370${}^{\ast \ast \ast }$	0.237${}^{\ast \ast \ast }$	0.021${}^{\ast }$	0.473${}^{\ast \ast \ast }$	1
(8) NPL_Bank	−0.200${}^{\ast \ast \ast }$	0.002	0.109${}^{\ast \ast \ast }$	0.168${}^{\ast \ast \ast }$	−0.461${}^{\ast \ast \ast }$	0.118${}^{\ast \ast \ast }$	0.314${}^{\ast \ast \ast }$	1
(9) NII_Bank	0.144${}^{\ast \ast \ast }$	−0.037${}^{\ast \ast \ast }$	−0.183${}^{\ast \ast \ast }$	−0.126${}^{\ast \ast \ast }$	0.504${}^{\ast \ast \ast }$	−0.042${}^{\ast \ast \ast }$	−0.412${}^{\ast \ast \ast }$	−0.188${}^{\ast \ast \ast }$	1
(10) ROA_Bank	0.198${}^{\ast \ast \ast }$	0.059${}^{\ast \ast \ast }$	−0.309${}^{\ast \ast \ast }$	0.104${}^{\ast \ast \ast }$	0.616${}^{\ast \ast \ast }$	0.255${}^{\ast \ast \ast }$	0.210${}^{\ast \ast \ast }$	−0.438${}^{\ast \ast \ast }$	0.380${}^{\ast \ast \ast }$
(11) GDP_Bank	−0.404${}^{\ast \ast \ast }$	0.080${}^{\ast \ast \ast }$	0.432${}^{\ast \ast \ast }$	0.241${}^{\ast \ast \ast }$	−0.389${}^{\ast \ast \ast }$	0.029${}^{\ast \ast }$	−0.367${}^{\ast \ast \ast }$	−0.029${}^{\ast \ast }$	−0.105${}^{\ast \ast \ast }$
(12) ΔGDP_Bank	0.057${}^{\ast \ast \ast }$	0.037${}^{\ast \ast \ast }$	−0.076${}^{\ast \ast \ast }$	0.104${}^{\ast \ast \ast }$	0.164${}^{\ast \ast \ast }$	0.059${}^{\ast \ast \ast }$	−0.071${}^{\ast \ast \ast }$	−0.208${}^{\ast \ast \ast }$	0.100${}^{\ast \ast \ast }$
(13) SIZE_Borrower	−0.157${}^{\ast \ast \ast }$	0.027${}^{\ast \ast }$	0.097${}^{\ast \ast \ast }$	0.102${}^{\ast \ast \ast }$	−0.100${}^{\ast \ast \ast }$	0.047${}^{\ast \ast \ast }$	−0.204${}^{\ast \ast \ast }$	−0.013	0.078${}^{\ast \ast \ast }$
(14) COVER_Borrower	−0.013	−0.007	0.036${}^{\ast \ast \ast }$	0.024${}^{\ast \ast }$	−0.037${}^{\ast \ast \ast }$	−0.01	0.002	0.021${}^{\ast }$	−0.032${}^{\ast \ast \ast }$
(15) DEBT_Borrower	0.015	−0.001	0.003	0.018${}^{\ast }$	−0.016	0.011	0.013	0.004	−0.003
(16) CURRENT_Borrower	0.039${}^{\ast \ast \ast }$	−0.009	0.011	−0.018${}^{\ast }$	−0.007	−0.041${}^{\ast \ast \ast }$	0.017	0.040${}^{\ast \ast \ast }$	−0.002
(17) GDP_Borrower	−0.383${}^{\ast \ast \ast }$	0.060${}^{\ast \ast \ast }$	0.289${}^{\ast \ast \ast }$	0.397${}^{\ast \ast \ast }$	−0.464${}^{\ast \ast \ast }$	0.137${}^{\ast \ast \ast }$	−0.082${}^{\ast \ast \ast }$	0.125${}^{\ast \ast \ast }$	−0.189${}^{\ast \ast \ast }$
(18) ΔGDP_Borrower	0.081${}^{\ast \ast \ast }$	−0.054${}^{\ast \ast \ast }$	−0.070${}^{\ast \ast \ast }$	0.030${}^{\ast \ast }$	0.168${}^{\ast \ast \ast }$	−0.037${}^{\ast \ast \ast }$	−0.012	−0.153${}^{\ast \ast \ast }$	0.087${}^{\ast \ast \ast }$
	(10)	(11)	(12)	(13)	(14)	(15)	(16)	(17)	(18)
Panel B. Correlation Between Climate Risk and Control Variables
(1) CRI_Bank_Cross
(2) CRI_Bank_Home
(3) SIZE_Bank
(4) EQRAT_Bank
(5) MTB_Bank
(6) DEPO_Bank
(7) LTA_Bank
(8) NPL_Bank
(9) NII_Bank
(10) ROA_Bank	1
(11) GDP_Bank	−0.120${}^{\ast \ast \ast }$	1
(12) ΔGDP_Bank	0.228${}^{\ast \ast \ast }$	0.078${}^{\ast \ast \ast }$	1
(13) SIZE_Borrower	−0.056${}^{\ast \ast \ast }$	0.286${}^{\ast \ast \ast }$	−0.023${}^{\ast }$	1
(14) COVER_Borrower	−0.014	0.030${}^{\ast \ast \ast }$	0.004	−0.139${}^{\ast \ast \ast }$	1
(15) DEBT_Borrower	−0.013	−0.003	0.005	0.126${}^{\ast \ast \ast }$	−0.307${}^{\ast \ast \ast }$	1
(16) CURRENT_Borrower	−0.016	−0.052${}^{\ast \ast \ast }$	−0.025${}^{\ast \ast }$	−0.083${}^{\ast \ast \ast }$	−0.013	0.050${}^{\ast \ast \ast }$	1
(17) GDP_Borrower	−0.158${}^{\ast \ast \ast }$	0.588${}^{\ast \ast \ast }$	−0.043${}^{\ast \ast \ast }$	0.254${}^{\ast \ast \ast }$	0.058${}^{\ast \ast \ast }$	0.007	−0.057${}^{\ast \ast \ast }$	1
(18) ΔGDP_Borrower	0.197${}^{\ast \ast \ast }$	−0.097${}^{\ast \ast \ast }$	0.467${}^{\ast \ast \ast }$	−0.057${}^{\ast \ast \ast }$	0.003	0.020${}^{\ast }$	−0.045${}^{\ast \ast \ast }$	−0.028${}^{\ast \ast }$	1

Panel A reports Pearson correlation coefficients between climate risk and systemic risk measures. Panel B reports correlation coefficients between climate risk measures and control variables. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$, and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Variables are defined in Appendix 1.

Table 6. The effects of climate risk on banks' individual and systemic risks.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
CRI_Bank_Cross	0.147${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.059${}^{\ast \ast \ast }$	0.102${}^{\ast \ast \ast }$	0.027${}^{\ast \ast \ast }$	0.061${}^{\ast \ast \ast }$
	(7.671)	(7.502)	(6.435)	(4.339)	(5.273)	(6.633)
CRI_Bank_Home	−0.006	0.000	0.007${}^{\ast \ast }$	−0.016${}^{\ast \ast }$	−0.039${}^{\ast \ast \ast }$	−0.035${}^{\ast \ast \ast }$
	(−0.935)	(0.055)	(2.246)	(−2.031)	(−18.777)	(−8.882)
SIZE_Bank	0.087${}^{\ast \ast \ast }$	0.003${}^{\ast \ast }$	0.070${}^{\ast \ast \ast }$	0.154${}^{\ast \ast \ast }$	0.049${}^{\ast \ast \ast }$	−0.049${}^{\ast \ast \ast }$
	(6.094)	(2.122)	(10.051)	(9.295)	(9.962)	(−5.793)
EQRAT_Bank	−0.000	0.003${}^{\ast \ast \ast }$	0.034${}^{\ast \ast \ast }$	0.093${}^{\ast \ast \ast }$	0.025${}^{\ast \ast \ast }$	−0.019${}^{\ast \ast \ast }$
	(−0.006)	(3.922)	(7.360)	(7.672)	(7.084)	(−2.905)
MTB_Bank	0.013	0.009${}^{\ast \ast \ast }$	−0.080${}^{\ast \ast \ast }$	0.012	0.046${}^{\ast \ast \ast }$	0.084${}^{\ast \ast \ast }$
	(0.735)	(6.236)	(−10.024)	(0.593)	(6.840)	(7.429)
DEPO_Bank	−0.077${}^{\ast \ast \ast }$	−0.004${}^{\ast \ast \ast }$	0.033${}^{\ast \ast \ast }$	0.078${}^{\ast \ast \ast }$	0.108${}^{\ast \ast \ast }$	0.212${}^{\ast \ast \ast }$
	(−4.535)	(−2.713)	(4.940)	(4.674)	(22.098)	(24.845)
LTA_Bank	0.048${}^{\ast \ast \ast }$	0.001	−0.150${}^{\ast \ast \ast }$	−0.080${}^{\ast \ast \ast }$	−0.056${}^{\ast \ast \ast }$	−0.126${}^{\ast \ast \ast }$
	(3.322)	(0.517)	(−22.624)	(−4.470)	(−10.872)	(−14.980)
NPL_Bank	0.222${}^{\ast \ast \ast }$	0.023${}^{\ast \ast \ast }$	0.012${}^{\ast }$	−0.034${}^{\ast }$	−0.008${}^{\ast }$	−0.060${}^{\ast \ast \ast }$
	(14.676)	(19.586)	(1.813)	(−1.710)	(−1.904)	(−8.316)
NII_Bank	0.130${}^{\ast \ast \ast }$	0.015${}^{\ast \ast \ast }$	−0.050${}^{\ast \ast \ast }$	−0.086${}^{\ast \ast \ast }$	0.040${}^{\ast \ast \ast }$	0.045${}^{\ast \ast \ast }$
	(11.872)	(13.146)	(−9.558)	(−6.202)	(9.070)	(6.422)
ROA_Bank	−0.267${}^{\ast \ast \ast }$	−0.030${}^{\ast \ast \ast }$	−0.024${}^{\ast \ast \ast }$	−0.041${}^{\ast \ast }$	−0.012${}^{\ast \ast \ast }$	−0.089${}^{\ast \ast \ast }$
	(−19.828)	(−26.157)	(−3.885)	(−2.439)	(−2.891)	(−11.816)
GDP_Bank	−0.169${}^{\ast \ast \ast }$	−0.013${}^{\ast \ast \ast }$	−0.120${}^{\ast \ast \ast }$	−0.420${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	−0.057${}^{\ast \ast \ast }$
	(−12.915)	(−11.407)	(−16.047)	(−25.258)	(2.824)	(−6.685)
ΔGDP_Bank	−0.156${}^{\ast \ast \ast }$	−0.004${}^{\ast \ast \ast }$	−0.006	−0.080${}^{\ast \ast \ast }$	−0.004	−0.023${}^{\ast \ast \ast }$
	(−12.997)	(−4.790)	(−1.378)	(−6.758)	(−1.399)	(−4.968)
SIZE_Borrower	0.047	0.005	−0.013	−0.056	0.007	0.012
	(1.221)	(1.361)	(−0.787)	(−1.364)	(0.741)	(0.671)
COVER_Borrower	0.006	−0.000	−0.004	−0.011	0.003	0.007
	(0.470)	(−0.392)	(−0.917)	(−0.833)	(1.079)	(1.453)
DEBT_Borrower	0.008	0.002	0.005	0.015	−0.002	−0.003
	(0.707)	(1.585)	(0.959)	(1.405)	(−0.870)	(−0.642)
CURRENT_Borrower	−0.002	0.001	−0.003	−0.000	0.002	−0.004
	(−0.147)	(0.565)	(−0.484)	(−0.003)	(0.518)	(−0.750)
GDP_Borrower	−0.002	−0.001	0.024	−0.029	0.024${}^{\ast }$	0.049${}^{\ast \ast }$
	(−0.031)	(−0.310)	(1.051)	(−0.487)	(1.766)	(2.084)
ΔGDP_Borrower	−0.007	0.000	0.003	0.009	−0.001	−0.002
	(−0.628)	(0.232)	(0.689)	(0.766)	(−0.520)	(−0.364)
Constant	3.351${}^{\ast \ast \ast }$	0.477${}^{\ast \ast \ast }$	2.653${}^{\ast \ast \ast }$	4.425${}^{\ast \ast \ast }$	0.873${}^{\ast \ast \ast }$	0.778${}^{\ast \ast \ast }$
	(580.371)	(960.696)	(860.958)	(567.684)	(362.269)	(181.959)
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	12,142	12,142	12,142	12,142	12,142	12,142
VIF	1.92	1.92	1.92	1.92	1.92	1.92
Adjusted $R^2$	0.914	0.903	0.887	0.712	0.662	0.494

This table reports baseline results of the impact of the banks' climate risk exposure on their individual and systemic risks. The regressions include borrower and year fixed effects (not reported). Standard errors are adjusted for clustering at the bank-borrower (lending relationship) level. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 7. The effects of climate risk on banks' individual and systemic risks: the moderating role of bank profitability.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
CRI_Bank_Cross	0.146${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.117${}^{\ast \ast \ast }$	0.216${}^{\ast \ast \ast }$	0.068${}^{\ast \ast \ast }$	0.117${}^{\ast \ast \ast }$
	(6.298)	(5.667)	(9.417)	(6.942)	(9.279)	(8.692)
Profit	−0.251${}^{\ast \ast \ast }$	−0.022${}^{\ast \ast \ast }$	0.009	0.115${}^{\ast \ast \ast }$	−0.006	0.122${}^{\ast \ast \ast }$
	(−12.785)	(−10.347)	(0.677)	(3.418)	(−0.766)	(9.847)
CRI_Bank_Cross×Profit	0.005	−0.000	−0.065${}^{\ast \ast \ast }$	−0.131${}^{\ast \ast \ast }$	−0.047${}^{\ast \ast \ast }$	−0.065${}^{\ast \ast \ast }$
	(0.282)	(−0.103)	(−6.955)	(−5.995)	(−7.591)	(−5.897)
CRI_Bank_Home	−0.009	−0.000	0.008${}^{\ast \ast }$	−0.013${}^{\ast }$	−0.039${}^{\ast \ast \ast }$	−0.032${}^{\ast \ast \ast }$
	(−1.378)	(−0.354)	(2.561)	(−1.666)	(−18.412)	(−8.328)
Constant	11.446${}^{\ast \ast \ast }$	1.121${}^{\ast \ast \ast }$	7.752${}^{\ast \ast \ast }$	27.218${}^{\ast \ast \ast }$	−2.446${}^{\ast \ast \ast }$	1.249
	(3.828)	(4.715)	(6.521)	(8.908)	(−3.337)	(1.001)
CRI_Bank_Cross+	0.151${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.052${}^{\ast \ast \ast }$	0.085${}^{\ast \ast \ast }$	0.021${}^{\ast \ast \ast }$	0.052${}^{\ast \ast \ast }$
CRI_Bank_Cross×Profit	(7.750)	(7.640)	(5.600)	(3.650)	(4.110)	(5.530)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.915	0.904	0.888	0.713	0.665	0.500

This table reports test results of the moderating role of bank profitability on the impact of climate risk on banks' individual and systemic risks. The regressions include borrower and year fixed effects (not reported). Standard errors are adjusted for clustering at the bank-borrower (lending relationship) level. ${}^{\ast \ast \ast }$ ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 8. The effects of climate risk on banks' individual and systemic risks: business cycle and financial crisis.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Controlling for Inflation Rate
CRI_Bank_Cross	0.381${}^{\ast \ast \ast }$	0.043${}^{\ast \ast \ast }$	0.225${}^{\ast \ast \ast }$	0.269${}^{\ast \ast \ast }$	0.057${}^{\ast \ast \ast }$	0.058${}^{\ast \ast \ast }$
	(19.203)	(26.042)	(26.145)	(16.210)	(16.372)	(11.274)
CRI_Bank_Home	−0.034${}^{\ast \ast }$	0.002${}^{\ast }$	0.005	−0.028${}^{\ast \ast \ast }$	−0.040${}^{\ast \ast \ast }$	−0.039${}^{\ast \ast \ast }$
	(−2.480)	(1.919)	(0.863)	(−2.917)	(−15.404)	(−10.311)
Inflation	0.029	0.009${}^{\ast \ast \ast }$	0.172${}^{\ast \ast \ast }$	0.244${}^{\ast \ast \ast }$	0.049${}^{\ast \ast \ast }$	0.042${}^{\ast \ast \ast }$
	(0.944)	(4.777)	(14.444)	(12.670)	(11.757)	(9.194)
Constant	3.351${}^{\ast \ast \ast }$	0.477${}^{\ast \ast \ast }$	2.653${}^{\ast \ast \ast }$	4.425${}^{\ast \ast \ast }$	0.873${}^{\ast \ast \ast }$	0.778${}^{\ast \ast \ast }$
	(337.363)	(619.146)	(595.880)	(495.515)	(332.038)	(179.031)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	No	No	No	No	No	No
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.628	0.635	0.578	0.467	0.454	0.441
Panel B. Interaction Test Results
CRI_Bank_Cross	0.287${}^{\ast \ast \ast }$	0.039${}^{\ast \ast \ast }$	0.183${}^{\ast \ast \ast }$	0.204${}^{\ast \ast \ast }$	0.048${}^{\ast \ast \ast }$	0.053${}^{\ast \ast \ast }$
	(21.473)	(26.205)	(26.572)	(14.318)	(15.230)	(10.732)
Crisis	6.238${}^{\ast \ast \ast }$	0.276${}^{\ast \ast \ast }$	1.829${}^{\ast \ast \ast }$	2.671${}^{\ast \ast \ast }$	0.650${}^{\ast \ast \ast }$	0.425${}^{\ast \ast \ast }$
	(64.068)	(46.814)	(37.646)	(32.176)	(39.371)	(19.064)
CRI_Bank_Cross×Crisis	0.826${}^{\ast \ast \ast }$	0.066${}^{\ast \ast \ast }$	1.657${}^{\ast \ast \ast }$	2.461${}^{\ast \ast \ast }$	0.302${}^{\ast \ast \ast }$	0.213${}^{\ast \ast \ast }$
	(5.801)	(7.125)	(16.749)	(14.584)	(10.276)	(4.832)
CRI_Bank_Home	0.014	0.004${}^{\ast \ast \ast }$	0.009${}^{\ast }$	−0.023${}^{\ast \ast \ast }$	−0.036${}^{\ast \ast \ast }$	−0.037${}^{\ast \ast \ast }$
	(1.499)	(3.850)	(1.911)	(−2.696)	(−15.625)	(−9.931)
Constant	3.040${}^{\ast \ast \ast }$	0.463${}^{\ast \ast \ast }$	2.565${}^{\ast \ast \ast }$	4.296${}^{\ast \ast \ast }$	0.841${}^{\ast \ast \ast }$	0.757${}^{\ast \ast \ast }$
	(423.884)	(612.512)	(636.333)	(501.169)	(336.232)	(170.875)
CRI_Bank_Cross+	1.113${}^{\ast \ast \ast }$	0.105${}^{\ast \ast \ast }$	1.840${}^{\ast \ast \ast }$	2.665${}^{\ast \ast \ast }$	0.350${}^{\ast \ast \ast }$	0.265${}^{\ast \ast \ast }$
CRI_Bank_Cross×Crisis	(7.850)	(11.540)	(18.640)	(15.850)	(12.040)	(6.080)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	No	No	No	No	No	No
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.823	0.694	0.715	0.583	0.553	0.460

This table reports subsample analysis results of business cycle and financial crisis. The regressions include borrower fixed effects (not reported). Standard errors are adjusted for clustering at the bank-borrower (lending relationship) level. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 9. The effects of climate risk on banks' subsequent lending behavior.

	(1)	(2)	(3)	(4)
	LTA	ΔLTA	LLP	ΔLLP
CRI_Bank_Cross	−0.021${}^{\ast \ast \ast }$	−0.017${}^{\ast \ast \ast }$	0.029${}^{\ast \ast }$	0.903${}^{\ast \ast \ast }$
	(−9.126)	(−7.167)	(1.998)	(5.781)
CRI_Bank_Home	−0.002${}^{\ast \ast \ast }$	−0.006${}^{\ast \ast \ast }$	0.049${}^{\ast \ast \ast }$	−0.162${}^{\ast \ast \ast }$
	(−2.712)	(−6.616)	(10.501)	(−4.707)
SIZE_Bank	−0.022${}^{\ast \ast \ast }$	0.004${}^{\ast \ast }$	0.163${}^{\ast \ast \ast }$	0.176${}^{\ast \ast }$
	(−10.861)	(2.476)	(15.837)	(2.563)
EQRAT_Bank	0.009${}^{\ast \ast \ast }$	0.014${}^{\ast \ast \ast }$	−0.032${}^{\ast \ast \ast }$	−0.176${}^{\ast \ast \ast }$
	(6.243)	(10.133)	(−3.178)	(−3.850)
MTB_Bank	−0.013${}^{\ast \ast \ast }$	0.009${}^{\ast \ast \ast }$	−0.059${}^{\ast \ast \ast }$	0.780${}^{\ast \ast \ast }$
	(−5.673)	(4.336)	(−4.815)	(6.719)
DEPO_Bank	0.026${}^{\ast \ast \ast }$	0.003	−0.086${}^{\ast \ast \ast }$	−0.315${}^{\ast \ast \ast }$
	(12.001)	(1.619)	(−7.743)	(−2.754)
NPL_Bank	0.076${}^{\ast \ast \ast }$	0.008${}^{\ast \ast \ast }$	0.255${}^{\ast \ast \ast }$	0.949${}^{\ast \ast \ast }$
	(47.163)	(6.355)	(22.478)	(8.464)
NII_Bank	−0.080${}^{\ast \ast \ast }$	−0.023${}^{\ast \ast \ast }$	−0.001	−0.988${}^{\ast \ast \ast }$
	(−57.868)	(−20.906)	(−0.139)	(−10.523)
ROA_Bank	0.068${}^{\ast \ast \ast }$	−0.007${}^{\ast \ast \ast }$	0.021${}^{\ast \ast }$	0.099${}^{\ast }$
	(46.198)	(−4.839)	(1.999)	(1.746)
GDP_Bank	−0.041${}^{\ast \ast \ast }$	0.016${}^{\ast \ast \ast }$	−0.003	−0.006
	(−25.253)	(9.933)	(−0.269)	(−0.044)
ΔGDP_Bank	0.002${}^{\ast }$	−0.007${}^{\ast \ast \ast }$	−0.076${}^{\ast \ast \ast }$	0.053
	(1.746)	(−5.649)	(−8.025)	(0.748)
SIZE_Borrower	0.005	−0.000	0.032	0.236
	(1.078)	(−0.121)	(1.133)	(1.317)
COVER_Borrower	0.002	−0.001	−0.003	−0.063
	(1.300)	(−0.373)	(−0.291)	(−0.823)
DEBT_Borrower	0.000	−0.003${}^{\ast }$	0.004	−0.025
	(0.104)	(−1.927)	(0.408)	(−0.437)
CURRENT_Borrower	0.000	−0.002	−0.004	−0.002
	(0.040)	(−1.439)	(−0.426)	(−0.036)
GDP_Borrower	0.005	−0.008	−0.033	−0.068
	(0.780)	(−1.439)	(−0.778)	(−0.214)
ΔGDP_Borrower	0.000	−0.000	0.000	−0.044
	(0.137)	(−0.247)	(0.048)	(−0.642)
Constant	0.501${}^{\ast \ast \ast }$	−0.015${}^{\ast \ast \ast }$	0.853${}^{\ast \ast \ast }$	−0.177${}^{\ast \ast \ast }$
	(624.223)	(−24.276)	(195.247)	(−5.053)
Borrower FE	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes
Observations	12,103	12,103	12,103	12,103
Adjusted $R^2$	0.769	0.243	0.731	0.070

This table reports test results of the impact of the banks' climate risk exposure on their subsequent lending behavior. The regressions include borrower and year fixed effects (not reported). Standard errors are adjusted for clustering at the bank-borrower (lending relationship) level. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 10. Alternative climate risk measures.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Residual Climate Risk
CRI_Bank_Cross_Res	0.097${}^{\ast \ast \ast }$	0.008${}^{\ast \ast \ast }$	0.040${}^{\ast \ast \ast }$	0.072${}^{\ast \ast \ast }$	0.015${}^{\ast \ast \ast }$	0.039${}^{\ast \ast \ast }$
	(7.816)	(7.355)	(6.760)	(4.698)	(4.547)	(6.649)
CRI_Bank_Home_Res	−0.011	−0.001	0.007${}^{\ast \ast }$	−0.020${}^{\ast \ast }$	−0.043${}^{\ast \ast \ast }$	−0.038${}^{\ast \ast \ast }$
	(−1.630)	(−0.976)	(2.145)	(−2.379)	(−19.837)	(−9.756)
Constant	11.741${}^{\ast \ast \ast }$	1.131${}^{\ast \ast \ast }$	7.622${}^{\ast \ast \ast }$	26.717${}^{\ast \ast \ast }$	−2.382${}^{\ast \ast \ast }$	0.816
	(3.737)	(4.640)	(6.133)	(8.370)	(−3.144)	(0.635)
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	11,768	11,768	11,768	11,768	11,768	11,768
Adjusted $R^2$	0.915	0.904	0.887	0.714	0.669	0.502
Panel B. Germanwatch Method
CRI_Bank_Cross_GW	0.019${}^{\ast \ast \ast }$	0.001${}^{\ast \ast \ast }$	0.006${}^{\ast \ast \ast }$	−0.003	0.006${}^{\ast \ast \ast }$	0.011${}^{\ast \ast \ast }$
	(9.364)	(5.818)	(6.097)	(−1.020)	(10.103)	(10.096)
CRI_Bank_Home_GW	−0.028${}^{\ast \ast \ast }$	0.001	−0.000	−0.019${}^{\ast \ast \ast }$	−0.035${}^{\ast \ast \ast }$	−0.024${}^{\ast \ast \ast }$
	(−4.395)	(0.873)	(−0.032)	(−2.663)	(−16.934)	(−6.426)
Constant	12.579${}^{\ast \ast \ast }$	1.204${}^{\ast \ast \ast }$	7.944${}^{\ast \ast \ast }$	27.186${}^{\ast \ast \ast }$	−1.948${}^{\ast \ast \ast }$	1.590
	(4.216)	(5.026)	(6.651)	(8.872)	(−2.666)	(1.278)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.915	0.903	0.887	0.711	0.663	0.495

This table reports test results of the impact of the banks' climate risk exposure on their individual and systemic risks based on the use of alternative climate risk measures. Panel A reports results based on an alternative climate risk measure computed as a residual of common risk factors. Panel B reports results using an alternative climate risk measure computed using the Germanwatch method. The regressions include borrower and year fixed effects (not reported). Standard errors are adjusted for clustering at the bank-borrower (lending relationship) level. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 11. Alternative loan samples.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Term Loans and Credit Lines Only
CRI_Bank_Cross	0.121${}^{\ast \ast \ast }$	0.010${}^{\ast \ast \ast }$	0.058${}^{\ast \ast \ast }$	0.052${}^{\ast \ast }$	0.031${}^{\ast \ast \ast }$	0.084${}^{\ast \ast \ast }$
	(6.520)	(5.975)	(6.151)	(2.198)	(5.757)	(8.788)
CRI_Bank_Home	−0.009	−0.000	0.004	−0.022${}^{\ast \ast \ast }$	−0.042${}^{\ast \ast \ast }$	−0.037${}^{\ast \ast \ast }$
	(−1.353)	(−0.277)	(1.442)	(−2.812)	(−19.632)	(−9.486)
Constant	12.138${}^{\ast \ast \ast }$	1.144${}^{\ast \ast \ast }$	7.503${}^{\ast \ast \ast }$	25.911${}^{\ast \ast \ast }$	−2.396${}^{\ast \ast \ast }$	1.030
	(3.957)	(4.678)	(6.144)	(8.318)	(−3.234)	(0.823)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	11,774	11,774	11,774	11,774	11,774	11,774
Adjusted $R^2$	0.914	0.903	0.887	0.713	0.664	0.497
Panel B. Lead Banks Only
CRI_Bank_Cross	0.131${}^{\ast \ast \ast }$	0.015${}^{\ast \ast \ast }$	0.058${}^{\ast \ast }$	0.157${}^{\ast \ast \ast }$	0.029${}^{\ast \ast \ast }$	0.056${}^{\ast \ast \ast }$
	(2.695)	(2.836)	(2.561)	(2.827)	(2.667)	(3.119)
CRI_Bank_Home	0.018	0.002	0.011	−0.002	−0.023${}^{\ast \ast \ast }$	−0.025${}^{\ast \ast }$
	(0.554)	(0.800)	(0.722)	(−0.045)	(−3.315)	(−2.440)
Constant	20.409${}^{\ast }$	1.976${}^{\ast \ast }$	9.747${}^{\ast \ast }$	41.394${}^{\ast \ast \ast }$	4.091${}^{\ast \ast }$	8.065${}^{\ast \ast \ast }$
	(1.925)	(2.508)	(2.510)	(4.294)	(2.390)	(2.905)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	1,387	1,387	1,387	1,387	1,387	1,387
Adjusted $R^2$	0.947	0.934	0.943	0.848	0.861	0.755

This table presents the test results regarding the impact of banks' climate risk exposure on their individual and systemic risks, using alternative loan samples. Panel A reports results based on a sample of term loans and credit lines. Panel B reports results based on a sample comprising lead banks only. The regressions include borrower and year fixed effects (not reported). Standard errors are adjusted for clustering at the bank-borrower (lending relationship) level. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 12. Weighted least squares.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Weighted Least Squares (by State Population)
CRI_Bank_Cross	0.147${}^{\ast \ast \ast }$	0.012${}^{\ast \ast \ast }$	0.060${}^{\ast \ast \ast }$	0.103${}^{\ast \ast \ast }$	0.027${}^{\ast \ast \ast }$	0.061${}^{\ast \ast \ast }$
	(7.707)	(7.504)	(6.510)	(4.407)	(5.180)	(6.552)
CRI_Bank_Home	−0.006	0.000	0.007${}^{\ast \ast }$	−0.015${}^{\ast \ast }$	−0.039${}^{\ast \ast \ast }$	−0.035${}^{\ast \ast \ast }$
	(−0.954)	(0.028)	(2.251)	(−2.019)	(−18.755)	(−8.836)
Constant	11.972${}^{\ast \ast \ast }$	1.181${}^{\ast \ast \ast }$	7.825${}^{\ast \ast \ast }$	27.395${}^{\ast \ast \ast }$	−2.357${}^{\ast \ast \ast }$	1.116
	(4.013)	(4.974)	(6.636)	(9.001)	(−3.207)	(0.891)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.915	0.903	0.887	0.713	0.663	0.494
Panel B. Weighted Least Squares (by Bank Market Capitalization)
CRI_Bank_Cross	0.149${}^{\ast \ast \ast }$	0.011${}^{\ast \ast \ast }$	0.059${}^{\ast \ast \ast }$	0.099${}^{\ast \ast \ast }$	0.025${}^{\ast \ast \ast }$	0.058${}^{\ast \ast \ast }$
	(7.518)	(7.013)	(6.768)	(4.452)	(4.933)	(6.456)
CRI_Bank_Home	−0.004	0.001${}^{\ast }$	0.005${}^{\ast }$	−0.018${}^{\ast \ast }$	−0.039${}^{\ast \ast \ast }$	−0.032${}^{\ast \ast \ast }$
	(−0.577)	(1.776)	(1.779)	(−2.509)	(−20.627)	(−9.071)
Constant	12.576${}^{\ast \ast \ast }$	1.278${}^{\ast \ast \ast }$	8.779${}^{\ast \ast \ast }$	29.630${}^{\ast \ast \ast }$	−1.704${}^{\ast \ast }$	2.749${}^{\ast \ast }$
	(4.057)	(5.591)	(7.461)	(9.934)	(−2.440)	(2.347)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.918	0.910	0.895	0.729	0.678	0.493

This table reports test results of the impact of the banks' climate risk exposure on their individual and systemic risks using Weighted Least Squares (WLS) estimation. Panel A reports results using state population of lender banks as the weight in the estimation. Panel B reports results using banks' market capitalization as the weight in the estimation. The regressions include bank, borrower and year fixed effects (not reported). Standard errors are adjusted for clustering at the bank-borrower (lending relationship) level. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 13. Standard errors.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Standard Errors Clustered at Borrower State Level
CRI_Bank_Cross	0.147${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.059${}^{\ast \ast \ast }$	0.102${}^{\ast \ast \ast }$	0.027${}^{\ast \ast \ast }$	0.061${}^{\ast \ast \ast }$
	(7.279)	(5.666)	(5.466)	(4.193)	(4.769)	(6.221)
CRI_Bank_Home	−0.006	0.000	0.007	−0.016	−0.039${}^{\ast \ast \ast }$	−0.035${}^{\ast \ast \ast }$
	(−1.148)	(0.068)	(1.593)	(−1.548)	(−13.416)	(−6.918)
Constant	12.024${}^{\ast \ast \ast }$	1.173${}^{\ast \ast \ast }$	7.819${}^{\ast \ast \ast }$	27.126${}^{\ast \ast \ast }$	−2.370${}^{\ast \ast }$	1.051
	(3.713)	(7.370)	(8.955)	(13.888)	(−2.603)	(0.757)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.914	0.903	0.887	0.712	0.662	0.494
Panel B. Standard Errors Clustered at Borrower Firm Level
CRI_Bank_Cross	0.147${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.059${}^{\ast \ast \ast }$	0.102${}^{\ast \ast \ast }$	0.027${}^{\ast \ast \ast }$	0.061${}^{\ast \ast \ast }$
	(7.219)	(7.732)	(6.688)	(4.442)	(5.623)	(6.832)
CRI_Bank_Home	−0.006	0.000	0.007${}^{\ast \ast }$	−0.016${}^{\ast \ast }$	−0.039${}^{\ast \ast \ast }$	−0.035${}^{\ast \ast \ast }$
	(−0.975)	(0.055)	(2.399)	(−2.116)	(−18.897)	(−8.956)
Constant	12.024${}^{\ast \ast \ast }$	1.173${}^{\ast \ast \ast }$	7.819${}^{\ast \ast \ast }$	27.126${}^{\ast \ast \ast }$	−2.370${}^{\ast \ast \ast }$	1.051
	(4.446)	(6.781)	(8.681)	(12.508)	(−3.589)	(0.983)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.914	0.903	0.887	0.712	0.662	0.494
Panel C. Newey-West Standard Errors
CRI_Bank_Cross	0.147${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.059${}^{\ast \ast \ast }$	0.102${}^{\ast \ast \ast }$	0.027${}^{\ast \ast \ast }$	0.061${}^{\ast \ast \ast }$
	(7.741)	(7.548)	(6.387)	(4.281)	(5.157)	(6.420)
CRI_Bank_Home	−0.006	0.000	0.007${}^{\ast \ast }$	−0.016${}^{\ast \ast }$	−0.039${}^{\ast \ast \ast }$	−0.035${}^{\ast \ast \ast }$
	(−0.936)	(0.056)	(2.284)	(−2.072)	(−19.183)	(−9.435)
Constant	11.885${}^{\ast \ast \ast }$	1.150${}^{\ast \ast \ast }$	8.321${}^{\ast \ast \ast }$	27.096${}^{\ast \ast \ast }$	−2.242${}^{\ast \ast \ast }$	0.941
	(4.300)	(5.128)	(6.837)	(8.706)	(−2.989)	(0.719)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.914	0.903	0.887	0.712	0.662	0.494

This table reports test results of the impact of the banks' climate risk exposure on their individual and systemic risks. Panel A reports results with standard errors adjusted for clustering at the borrower state level. Panel B reports results with standard errors adjusted for clustering at the borrower's firm level. Panel C reports results with heteroskedasticity- and autocorrelation-consistent (HAC) standard errors computed following the Newey and West (1987) procedure that allows for up to two periods of autocorrelation. The regressions include bank, borrower and year fixed effects (not reported). ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 14. Alternative fixed effects specifications.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Year Fixed Effects Only
CRI_Bank_Cross	0.147${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.064${}^{\ast \ast \ast }$	0.111${}^{\ast \ast \ast }$	0.029${}^{\ast \ast \ast }$	0.060${}^{\ast \ast \ast }$
	(8.156)	(8.275)	(6.688)	(4.727)	(5.578)	(6.348)
CRI_Bank_Home	−0.009	−0.001	0.007${}^{\ast \ast }$	−0.015${}^{\ast \ast }$	−0.040${}^{\ast \ast \ast }$	−0.036${}^{\ast \ast \ast }$
	(−1.428)	(−0.903)	(2.337)	(−1.965)	(−19.547)	(−9.301)
Constant	11.225${}^{\ast \ast \ast }$	1.055${}^{\ast \ast \ast }$	9.058${}^{\ast \ast \ast }$	26.288${}^{\ast \ast \ast }$	−1.609${}^{\ast \ast \ast }$	2.493${}^{\ast \ast \ast }$
	(13.317)	(13.996)	(18.211)	(22.889)	(−4.850)	(4.096)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	No	No	No	No	No	No
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.914	0.903	0.883	0.706	0.655	0.484
Panel B. No Fixed Effects
CRI_Bank_Cross	0.352${}^{\ast \ast \ast }$	0.044${}^{\ast \ast \ast }$	0.266${}^{\ast \ast \ast }$	0.296${}^{\ast \ast \ast }$	0.066${}^{\ast \ast \ast }$	0.060${}^{\ast \ast \ast }$
	(24.172)	(36.589)	(40.044)	(23.030)	(22.566)	(13.085)
CRI_Bank_Home	−0.056${}^{\ast \ast \ast }$	0.001	−0.001	−0.040${}^{\ast \ast \ast }$	−0.043${}^{\ast \ast \ast }$	−0.043${}^{\ast \ast \ast }$
	(−3.961)	(1.047)	(−0.229)	(−3.855)	(−16.156)	(−11.419)
Constant	−15.011${}^{\ast \ast \ast }$	−1.259${}^{\ast \ast \ast }$	8.487${}^{\ast \ast \ast }$	15.243${}^{\ast \ast \ast }$	−1.327${}^{\ast \ast \ast }$	0.165
	(−12.109)	(−12.780)	(13.767)	(14.205)	(−5.190)	(0.432)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	No	No	No	No	No	No
Year FE	No	No	No	No	No	No
Observations	12,142	12,142	12,142	12,142	12,142	12,142
Adjusted $R^2$	0.537	0.552	0.445	0.354	0.361	0.406

This table reports test results of the impact of the banks' climate risk exposure on their individual and systemic risks based on different fixed effects choices. Panel A reports results using state population of lender banks as the weight in the estimation. Panel B reports results using banks' market capitalization as the weight in the estimation. The regressions include bank, borrower and year fixed effects (not reported). Standard errors are adjusted for clustering at the bank-borrower (lending relationship) level. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 15. Loan-level analyzes: main results.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Standard Errors Clustered at the Lending Relationship Level
CRI_Bank_Cross	0.144${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.063${}^{\ast \ast \ast }$	0.112${}^{\ast \ast \ast }$	0.028${}^{\ast \ast \ast }$	0.064${}^{\ast \ast \ast }$
	(6.532)	(6.663)	(6.033)	(4.022)	(4.974)	(6.071)
CRI_Bank_Home	−0.007	0.000	0.006${}^{\ast }$	−0.016${}^{\ast }$	−0.042${}^{\ast \ast \ast }$	−0.038${}^{\ast \ast \ast }$
	(−0.972)	(0.032)	(1.885)	(−1.884)	(−18.424)	(−8.968)
Constant	13.569${}^{\ast \ast \ast }$	1.310${}^{\ast \ast \ast }$	7.530${}^{\ast \ast \ast }$	25.517${}^{\ast \ast \ast }$	−2.224${}^{\ast \ast \ast }$	0.746
	(4.373)	(5.044)	(6.145)	(8.205)	(−2.748)	(0.540)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	15,037	15,037	15,037	15,037	15,037	15,037
Adjusted $R^2$	0.913	0.901	0.889	0.711	0.663	0.497
Panel B. Standard Errors Clustered at the Package Level
CRI_Bank_Cross	0.144${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.063${}^{\ast \ast \ast }$	0.112${}^{\ast \ast \ast }$	0.028${}^{\ast \ast \ast }$	0.064${}^{\ast \ast \ast }$
	(5.857)	(6.638)	(6.139)	(4.011)	(5.040)	(6.034)
CRI_Bank_Home	−0.007	0.000	0.006${}^{\ast \ast }$	−0.016${}^{\ast \ast }$	−0.042${}^{\ast \ast \ast }$	−0.038${}^{\ast \ast \ast }$
	(−0.962)	(0.031)	(1.964)	(−1.981)	(−18.671)	(−9.707)
Constant	13.569${}^{\ast \ast \ast }$	1.310${}^{\ast \ast \ast }$	7.530${}^{\ast \ast \ast }$	25.517${}^{\ast \ast \ast }$	−2.224${}^{\ast \ast \ast }$	0.746
	(5.835)	(7.642)	(8.102)	(11.526)	(−3.807)	(0.773)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	15,037	15,037	15,037	15,037	15,037	15,037
Adjusted $R^2$	0.913	0.901	0.889	0.711	0.663	0.497
Panel C. Standard Errors Clustered at the Facility Level
CRI_Bank_Cross	0.144${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.063${}^{\ast \ast \ast }$	0.112${}^{\ast \ast \ast }$	0.028${}^{\ast \ast \ast }$	0.064${}^{\ast \ast \ast }$
	(6.864)	(8.224)	(7.324)	(5.017)	(5.751)	(7.043)
CRI_Bank_Home	−0.007	0.000	0.006${}^{\ast \ast }$	−0.016${}^{\ast \ast }$	−0.042${}^{\ast \ast \ast }$	−0.038${}^{\ast \ast \ast }$
	(−1.129)	(0.038)	(2.302)	(−2.392)	(−22.194)	(−11.558)
Constant	13.569${}^{\ast \ast \ast }$	1.310${}^{\ast \ast \ast }$	7.530${}^{\ast \ast \ast }$	25.517${}^{\ast \ast \ast }$	−2.224${}^{\ast \ast \ast }$	0.746
	(6.242)	(8.787)	(8.871)	(12.765)	(−4.355)	(0.877)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	15,037	15,037	15,037	15,037	15,037	15,037
Adjusted $R^2$	0.913	0.901	0.889	0.711	0.663	0.497

This table reports the loan-level analysis results of the impact of the banks' climate risk exposure on their individual and systemic risks. The regressions include borrower and year fixed effects (not reported). ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 16. Loan-level analyzes: the moderating role of loan purposes

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Operating and Capital Expenditure
CRI_Bank_Cross	0.140${}^{\ast \ast \ast }$	0.012${}^{\ast \ast \ast }$	0.055${}^{\ast \ast \ast }$	0.090${}^{\ast \ast \ast }$	0.025${}^{\ast \ast \ast }$	0.056${}^{\ast \ast \ast }$
	(5.533)	(5.650)	(5.075)	(3.034)	(4.277)	(5.077)
CapEx	0.016	−0.001	0.006	0.031	0.006	0.012
	(0.733)	(−0.821)	(0.629)	(1.555)	(1.253)	(1.397)
CRI_Bank_Cross×CapEx	0.017	0.004${}^{\ast }$	0.037${}^{\ast \ast \ast }$	0.097${}^{\ast \ast \ast }$	0.013${}^{\ast }$	0.033${}^{\ast \ast }$
	(0.637)	(1.882)	(2.817)	(3.009)	(1.708)	(2.360)
CRI_Bank_Home	−0.007	0.000	0.006${}^{\ast }$	−0.016${}^{\ast \ast }$	−0.042${}^{\ast \ast \ast }$	−0.038${}^{\ast \ast \ast }$
	(−0.981)	(0.000)	(1.895)	(−2.055)	(−18.703)	(−9.763)
Constant	13.593${}^{\ast \ast \ast }$	1.309${}^{\ast \ast \ast }$	7.540${}^{\ast \ast \ast }$	25.568${}^{\ast \ast \ast }$	−2.214${}^{\ast \ast \ast }$	0.766
	(5.837)	(7.652)	(8.119)	(11.594)	(−3.797)	(0.793)
CRI_Bank_Cross+	0.157${}^{\ast \ast \ast }$	0.016${}^{\ast \ast \ast }$	0.092${}^{\ast \ast \ast }$	0.187${}^{\ast \ast \ast }$	0.038${}^{\ast \ast \ast }$	0.089${}^{\ast \ast \ast }$
CRI_Bank_Cross×CapEx	(4.930)	(6.860)	(6.350)	(5.190)	(4.840)	(5.960)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	15,037	15,037	15,037	15,037	15,037	15,037
Adjusted $R^2$	0.913	0.901	0.889	0.711	0.663	0.497
Panel B. Capital Structure
CRI_Bank_Cross	0.143${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.063${}^{\ast \ast \ast }$	0.112${}^{\ast \ast \ast }$	0.028${}^{\ast \ast \ast }$	0.064${}^{\ast \ast \ast }$
	(6.517)	(6.646)	(6.018)	(4.008)	(4.982)	(6.085)
CS	−0.166	−0.016${}^{\ast }$	−0.002	0.041	−0.026	−0.033
	(−1.523)	(−1.784)	(−0.059)	(0.377)	(−1.082)	(−0.925)
CRI_Bank_Cross×CS	0.125${}^{\ast }$	0.009	0.033	0.072	−0.011	−0.038
	(1.758)	(1.360)	(1.046)	(0.815)	(−0.495)	(−1.027)
CRI_Bank_Home	−0.007	0.000	0.006${}^{\ast }$	−0.016${}^{\ast }$	−0.042${}^{\ast \ast \ast }$	−0.038${}^{\ast \ast \ast }$
	(−0.978)	(0.023)	(1.892)	(−1.875)	(−18.426)	(−8.974)
Constant	13.717${}^{\ast \ast \ast }$	1.322${}^{\ast \ast \ast }$	7.561${}^{\ast \ast \ast }$	25.576${}^{\ast \ast \ast }$	−2.229${}^{\ast \ast \ast }$	0.718
	(4.420)	(5.084)	(6.173)	(8.228)	(−2.753)	(0.518)
CRI_Bank_Cross+	0.268${}^{\ast \ast \ast }$	0.022${}^{\ast \ast \ast }$	0.096${}^{\ast \ast \ast }$	0.184${}^{\ast \ast }$	0.017	0.026
CRI_Bank_Cross×CS	(3.580)	(3.210)	(2.910)	(2.020)	(0.800)	(0.690)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	15,037	15,037	15,037	15,037	15,037	15,037
Adjusted $R^2$	0.913	0.901	0.889	0.711	0.663	0.497
Panel C. M&A and Buyouts
CRI_Bank_Cross	0.150${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.063${}^{\ast \ast \ast }$	0.108${}^{\ast \ast \ast }$	0.028${}^{\ast \ast \ast }$	0.064${}^{\ast \ast \ast }$
	(6.925)	(6.801)	(6.151)	(4.012)	(4.846)	(6.033)
M&A	−0.004	0.000	−0.003	−0.017	−0.001	−0.010
	(−0.148)	(0.165)	(−0.262)	(−0.591)	(−0.141)	(−0.887)
CRI_Bank_Cross×M&A	−0.053${}^{\ast \ast }$	−0.002	−0.002	0.032	0.004	0.001
	(−2.149)	(−0.997)	(−0.153)	(0.890)	(0.465)	(0.066)
CRI_Bank_Home	−0.007	0.000	0.006${}^{\ast }$	−0.016${}^{\ast }$	−0.042${}^{\ast \ast \ast }$	−0.038${}^{\ast \ast \ast }$
	(−0.979)	(0.029)	(1.884)	(−1.882)	(−18.425)	(−8.971)
Constant	13.308${}^{\ast \ast \ast }$	1.298${}^{\ast \ast \ast }$	7.524${}^{\ast \ast \ast }$	25.702${}^{\ast \ast \ast }$	−2.204${}^{\ast \ast \ast }$	0.766
	(4.302)	(5.017)	(6.156)	(8.274)	(−2.734)	(0.557)
CRI_Bank_Cross+	0.097${}^{\ast \ast \ast }$	0.011${}^{\ast \ast \ast }$	0.061${}^{\ast \ast \ast }$	0.140${}^{\ast \ast \ast }$	0.032${}^{\ast \ast \ast }$	0.065${}^{\ast \ast \ast }$
CRI_Bank_Cross×M&A	(2.980)	(3.710)	(3.710)	(2.990)	(3.460)	(3.720)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	15,037	15,037	15,037	15,037	15,037	15,037
Adjusted $R^2$	0.913	0.901	0.889	0.711	0.663	0.497

This table reports the loan-level analysis results of the moderating role of loan purpose on the impact of the banks' climate risk exposure on their individual and systemic risks. The regressions include borrower and year fixed effects (not reported). Standard errors are adjusted for clustering at the lending relationship level. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table 17. Loan-level analyzes: alternative fixed effects specifications.

	(1)	(2)	(3)	(4)	(5)	(6)
	−MES	−LRMES	−VaR5	−VaR1	$-\mathrm{\Delta }$CoVaR5	$-\mathrm{\Delta }$CoVaR1
Panel A. Package and Year Fixed Effects
CRI_Bank_Cross	0.141${}^{\ast \ast \ast }$	0.013${}^{\ast \ast \ast }$	0.064${}^{\ast \ast \ast }$	0.109${}^{\ast \ast \ast }$	0.032${}^{\ast \ast \ast }$	0.070${}^{\ast \ast \ast }$
	(5.472)	(6.145)	(6.029)	(3.672)	(5.505)	(6.487)
CRI_Bank_Home	−0.006	0.000	0.005${}^{\ast }$	−0.015${}^{\ast }$	−0.043${}^{\ast \ast \ast }$	−0.041${}^{\ast \ast \ast }$
	(−0.839)	(0.154)	(1.808)	(−1.860)	(−19.121)	(−10.309)
Constant	11.706${}^{\ast \ast \ast }$	1.134${}^{\ast \ast \ast }$	8.910${}^{\ast \ast \ast }$	25.213${}^{\ast \ast \ast }$	−1.377${}^{\ast \ast \ast }$	3.125${}^{\ast \ast \ast }$
	(15.277)	(15.030)	(26.161)	(29.899)	(−5.518)	(7.636)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Package FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	15,037	15,037	15,037	15,037	15,037	15,037
Adjusted $R^2$	0.912	0.899	0.887	0.702	0.648	0.474
Panel B. Bank, Borrower, and Year Fixed Effects
CRI_Bank_Cross	0.125${}^{\ast \ast \ast }$	0.009${}^{\ast \ast \ast }$	0.047${}^{\ast \ast \ast }$	0.083${}^{\ast \ast \ast }$	0.001	0.009${}^{\ast \ast }$
	(5.167)	(4.980)	(6.119)	(4.646)	(0.675)	(2.194)
CRI_Bank_Home	−0.016${}^{\ast \ast }$	−0.000	0.004	−0.021${}^{\ast \ast \ast }$	0.003${}^{\ast \ast \ast }$	−0.000
	(−2.317)	(−0.223)	(1.551)	(−2.907)	(3.930)	(−0.021)
Constant	15.606${}^{\ast \ast \ast }$	2.299${}^{\ast \ast \ast }$	−13.896${}^{\ast \ast \ast }$	−12.788${}^{\ast \ast \ast }$	−3.039${}^{\ast \ast \ast }$	−0.064
	(5.096)	(6.617)	(−13.515)	(−4.214)	(−10.097)	(−0.165)
Controls	Yes	Yes	Yes	Yes	Yes	Yes
Bank FE	Yes	Yes	Yes	Yes	Yes	Yes
Borrower FE	Yes	Yes	Yes	Yes	Yes	Yes
Year FE	Yes	Yes	Yes	Yes	Yes	Yes
Observations	15,037	15,037	15,037	15,037	15,037	15,037
Adjusted $R^2$	0.924	0.914	0.941	0.841	0.968	0.965

This table reports the loan-level analysis results based on alternative fixed effects specifications. Panel A reports results with the use of package and year fixed effects. Panel B reports results with the use of bank, borrower, and year fixed effects. Standard errors are adjusted for clustering at the package level. ${}^{\ast \ast \ast }$, ${}^{\ast \ast }$ and ${}^{\ast }$ indicate statistical significance at the 1%, 5%, and 10% levels, respectively. Robust t-statistics are reported in parentheses. Variables are defined in Appendix 1.

Table

Variable	Definition	Source
Climate Risk Measures
CRI_State	State-level climate risk calculated based on the Billion-Dollar Weather and Climate Disasters data by the National Centers for Environmental Information (NOAA). It is defined as the first principal component of six key climate risk indicators: (1) number of deaths, (2) number of deaths per 100,000 inhabitants, (3) sum of losses in USD at purchasing power parity (PPP), (4) losses per unit of Gross Domestic Product (GDP), (5) number of events, and (6) loss per event.	BEA NOAA
CRI_State_GW	State-level climate risk calculated using the Germanwatch method. It is defined as the sum of the state's score in all four indicating categories: (1) number of deaths, (2)number of deaths per 100,000 inhabitants, (3) sum of losses in USD at PPP, (4) losses per unit of GDP, (5) number of events, and (6) loss per event.	As above
CRI_Bank_Cross	Bank-level unexpected climate risk acquired through cross-state lending. The sum of a bank's lending to a foreign state as a percentage of its total lending weighted by the unexpected component of CRI_State of the specific state for each year.	BEA NOAA Dealscan
CRI_Bank_Home	Bank-level unexpected climate risk acquired through within-state lending. The sum of a bank's lending to its home state as a percentage of its total lending weighted by CRI_State of its home state for each year.	As above
CRI_Bank_Cross_Res	Bank-level residual climate risk related to cross-state lending. The residual imputed from regressing CRI_Bank_Cross on a set of market-based common risk factors including market risk, market risk for the banking industry, credit risk, commodity risk, political risk, real estate risk, and sovereign risk.	As above
CRI_Bank_Home_Res	Bank-level residual climate risk related to within-state lending. The residual imputed from regressing CRI_Bank_Home on a set of market-based common risk factors including market risk, market risk for the banking industry, credit risk, commodity risk, political risk, real estate risk, and sovereign risk.	As above
CRI_Bank_Cross_GW	Bank-level climate risk related to cross-state lending calculated based on CRI_State_GW.	As above
CRI_Bank_Home_GW	Bank-level climate risk related to within-state lending calculated based on CRI_State_GW.	As above
Dependent Variables
MES	Marginal expected shortfall. The average return for a bank during the 5% worst return days for the banking industry in a year.	CRSP
LRMES	Long-run marginal expected shortfall during the 2% worst return days for the banking industry in a year.	As above
VaR5	Value at risk at the 5%. The annual average of the 5th percentile of a bank's asset return in a weekly interval.	As above
VaR1	Value at risk at the 1%. The annual average of the 1st percentile of a bank's asset return in a weekly interval.	As above
ΔCoVaR5	A measure of a bank's marginal contribution to the risk of the system, computed as the difference between the value at risk of the system when the institution's return is at the 5th percentile and the value at risk of the system when the institution' return is at the median.	As above
ΔCoVaR1	A measure of a bank's marginal contribution to the risk of the system, computed as the difference between the value at risk of the system when the institution's return is at the 1st percentile and the value at risk of the system when the institution' return is at the median.	As above
Variable	Definition	Source
LTA	Loans-to-assets ratio. Loans net of total allowance for loan losses (lntal) divided by total assets (at).	Compustat
ΔLTA	Annual changes in LTA.	As above
LLP	Loan loss provision ratio. Provision for loan or asset losses (pll) divided by total loans (lntal).	As above
ΔLLP	Annual changes in LLP.	As above
Lender Characteristics
SIZE_Bank	Bank size. Natural logarithm of total assets (at).	As above
EQRAT_Bank	Equity ratio. Book value of equity (ceq) divided by total assets (at).	As above
MTB_Bank	Market-to-book ratio. Market value of equity (prccm×cshom) divided by book value of equity (ceq).	As above
DEPO_Bank	Deposit ratio. Total deposits (dptc) divided by total assets (at).	As above
LTA_Bank	Loans-to-assets ratio. Loans net of total allowance for loan losses (lntal) divided by total assets (at).	As above
NPL_Bank	Nonperforming loans ratio. Nonperforming assets (npat) divided by total assets (at).	As above
NII_Bank	Noninterest income ratio. Total noninterest income (tnii) divided by total assets (at).	As above
ROA_Bank	Return on assets. Net income (ni) divided by total assets (at).	As above
Borrower Characteristics
SIZE_Borrower	Firm size. Natural logarithm of total assets (at).	As above
COVER_Borrower	Interest coverage. Earnings before interest (ebitda) divided by total interest expense (xint).	As above
DEBT_Borrower	Debt-to-EBITDA ratio. Debt (dltt+dlc) divided by earnings before interest, taxes, depreciation, and amortization (ebitda).	As above
CURRENT_Borrower	Current ratio. Current assets (aco) divided by current liabilities (lco).	As above
State-Level Variables
GDP_Bank	Natural logarithm of annual gross domestic product (GDP) per capita of the lender bank's state.	BEA
ΔGDP_Bank	Annual growth rate of GDP per capita of the lender bank's state.	As above
GDP_Borrower	Natural logarithm of annual GDP per capita of the borrower firm's state.	As above
ΔGDP_Borrower	Annual growth rate of GDP per capita of the borrower firm's state.	As above
Inflation	Annual inflation rate of the United States.	As above
Other Variables
Profit	A dummy variable that takes a value of one if a bank's ROA is above the yearly sample median.	Compustat
Crisis	A dummy variable that takes a value of one if the year is within the 2008–2009 financial crisis period, and zero otherwise.
CapEx	A dummy variable that takes a value of one if the loan is used for operating and capital expenditures, and zero otherwise.	Dealscan
CS	A dummy variable that takes a value of one if the loan is used to manage capital structure, and zero otherwise.	As above
M&A	A dummy variable that takes a value of one if the loan is used for mergers, acquisitions, or buyouts, and zero otherwise.	As above

Table

Risk Factor	Description	Source
Interest rate risk	Percentage changes in the market value of long-term assets. The factor is based on market prices of 10-year government bonds.	Datastream
Credit risk	Changes in the default premium between BAA– and AAA–rated corporate bonds. The factor is based on the time series maintained by Moody's.	Datastream
Commodity risk	Percentage changes in the S&P GSCI Total Return Index.	Datastream
Foreign exchange risk	Percentage changes in the trade-weighted currency baskets. The factor measures the currency value with respect to the currency values of the major trade partners.	Bank of England
Market risk	Percentage changes in the market value of S&P 500.	Datastream
Market risk (banking industry)	Percentage changes in the market value of the banking sector stock market portfolios.	Datastream
Political risk	Percentage changes in gold price against U.S. dollars.	Bank of England
Real estate risk	Percentage changes in the market value of the REIT investments.	Datastream
Sovereign risk	Changes in the difference of the (mean) of yields on the 10-year government bonds (Greece, Portugal, Spain, Italy) and 10-year German Government bonds.	Datastream
VIX	Chicago Board Options Exchange volatility index. The index measures market expectations of short-term volatility based on S&P 500 stock-index option prices.	Datastream

Newey, W. K., and K. D. West. 1987. “A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix.” Econometrica 55 (3): 703–708. https://doi.org/10.2307/1913610.

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