Report
U.S. Banks’ Exposures to Climate Transition Risks
Abstract: We propose a new approach to estimate banks’ credit exposures to transition risks that combines sectoral effects of climate policies from general equilibrium (GE) models with historical information on loans’ default risks. At worst, estimated exposures reach 14 percent of bank loan portfolio values. Accounting for historic loan payoff structures reduces exposures to 0.5 percent–2 percent. Exposures can increase by 3–5 percentage points due to aggregate economic shocks. Analyses surrounding climate transition events suggest our estimates can serve as an upper bound on banks’ transition risk exposures. Highlighting our measure’s novelty, emissions explain at most 60 percent of variation in banks’ exposures.
JEL Classification: G21; H23; Q54;
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Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Staff Reports
Publication Date: 2023-04-01
Number: 1058
Note: Revised June 2026.