The Spillover Effect Of Climate Risk In China’s Stock Market

Extreme climate events in our country has become more and more common and frequent,and the climate risk level is on the rise,which affects our economic and social development.Our government has issued and implemented more and more climate policies to recede the increasingly serious problem of carbon emission in order to promote the realization of the "two-carbon" goal.Climate change and its response policies will have an important impact on a country’s macroeconomic development and financial stability.In order to study the relationship between climate policy and economic and financial stability,the invested economic sectors in the investment market are reclassified into climate policy-related sectors(energy and chemicals,public utilities,industrial buildings and real estate,transportation and others).Investment information of China’s top 100 enterprises in2022 are selected and reclassified according to their investment projects.Based on the measurement of Va R and Co Va R,a risk spillover network is constructed to accurately depict the risk spillover effect between different industries.At the same time,the Va R of each enterprise is computed.The empirical results show that: investment in transportation industry and investment in other industries has significant spillover effect on the financial market,investments in construction and real estate enterprises have the weakest spillover effect on the financial market;In the risk spillover network,enterprises that invest in public infrastructure projects,enterprises that invest in traffic and transportation industry,and enterprises that invest in other industries are the most influential enterprises,meanwhile,enterprises that invest in industrial construction and real estate industry are the nodes with the least influential communication network.Climate policy index,firm establishment time,firm structure and macroeconomic variables have a significant impact on Va R.This study can provide reference for regulators to effectively identify the influential industries in our stock market,formulate targeted risk prevention measures according to the spillover association of key industries,and set up an early warning mechanism for the risk spillover effect;strengthen supervision,clarify the ways of risk transmission,and effectively prevent risks to promote stability in the development of the financial system.