{
  "title": "Climate Transition Risk and Financial Stability in France",
  "publication": "IMF Working Papers, July 12, 2024",
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  "summary": "This study empirically investigates the impact of the climate transition on the French financial sector using a micro-macro approach to examine the long-term effects of climate mitigation and decarbonization policies on sectoral output and the effects on firm profitability and the likelihood of corp",
  "sections": [
    {
      "heading": "Study design and methodology",
      "content": "- Empirical investigation using a micro-macro approach to examine long-term effects of climate mitigation and decarbonization policies on sectoral output, firm profitability, and likelihood of corporate defaults.\n- Modeling tools and data integration:\n  - Recursive-dynamic, multi-regional, multi-sectoral computable general equilibrium (CGE) model used to simulate the Fit-for-55 climate scenario.\n  - Sectoral output paths from the CGE model are integrated into firm-level corporate balance sheets and risk metrics.\n  - Assessment of banks’ credit exposure to energy-intensive sectors."
    },
    {
      "heading": "Key findings",
      "content": "- Under the Fit-for-55 scenario:\n  - The mining sector might face notable increases in its probability of defaults.\n  - The chemicals sector might face notable increases in its probability of defaults.\n  - The manufacturing sector might face notable increases in its probability of defaults.\n- These sectoral increases in default probability could create pockets of vulnerabilities in some parts of the banking system, depending on banks’ exposure to the identified energy-intensive sectors."
    },
    {
      "heading": "Policy implications and recommendations",
      "content": "- Highlights the importance of a timely and orderly transition to limit concentrated financial-sector risks.\n- Recommends integrating climate transition plans into the prudential framework to address potential pockets of vulnerability stemming from exposure to energy-intensive sectors.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2024/07/10/climate-transition-risk-and-financial-stability-in-france-551678"
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    "Authors: Rachel Lee, Hugo Rojas-Romagosa, Iulia Ruxandra Teodoru, Xiaoxiao Zhang",
    "Published: July 12, 2024",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400280696.001",
    "Empirical investigation using a micro-macro approach to examine long-term effects of climate mitigation and decarbonization policies on sectoral output, firm profitability, and likelihood of corporate defaults.",
    "Modeling tools and data integration:",
    "Under the Fit-for-55 scenario:",
    "These sectoral increases in default probability could create pockets of vulnerabilities in some parts of the banking system, depending on banks’ exposure to the identified energy-intensive sectors.",
    "Highlights the importance of a timely and orderly transition to limit concentrated financial-sector risks.",
    "Recommends integrating climate transition plans into the prudential framework to address potential pockets of vulnerability stemming from exposure to energy-intensive sectors.",
    "**Working Paper**"
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