Publication

The Diverging Impact of Climate Policy Intensity and Climate Adaptation Readiness on U.S. Bank Performance and Risk

Kapetanakis, K.M.
; 
Floros, C.
; 
Tan, Yong
Publication Date
2025-11
End of Embargo
Supervisor
Keywords
Bank, Environmental policy stringency, Climate policy uncertainty, PCA, Panel, Fixed effects, General additive models, GMM, Risk, Profitability, ZSCORE, Climate adapation initiatives, ND-Gain score
Rights
© 2025 The Author(s). This is the Author Accepted Manuscript of the article distributed under the Creative Commons CC-BY license (https://creativecommons.org/licenses/by/4.0) in accordance with the University of Bradford Rights Retention Policy.
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Peer-Reviewed
Yes
Open Access status
openAccess
Accepted for publication
2025-09-17
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Awarded
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Management and Law Publications
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kapetanakis_et_al_2025.pdf
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Abstract
Using data from the largest U.S. Banks between 2005 and 2021, we examine how climate policy influence U.S. banks. In particular, the study explores the differential or reverse effects of Environmental Policy Stringency (EPS), Policy Uncertainty (CPU) and Climate Adaptation Readiness (ND Gain Score) on risk and performance of U.S. banks. We examine the hypotheses that the joint effects of Climate Policy Uncertainty and Stringency would increase bank risks whilst climate adaptation initiatives would reduce bank risk and boost banking performance. We further highlight the evolving nature of climate policy landscape and its impact to banking risk and performance by adding tests to explore time varying effects (post Paris agreement). Our research aims to shed more light on the environmental policies-risk-performance nexus, a topic that is gaining traction among stakeholders, regulators and investors. Our findings contribute to understanding the economic impact of climate policies in banking and showcase the crucial role of short-term costs and long-term benefits of adaptation for helping regulators and policymakers in evaluating climate-based turbulence and financial sector regulation.
URI
https://bradscholars.brad.ac.uk/handle/10454/20590
Version
Accepted manuscript
Citation
Kapetanakis KM, Floros C and Tan Y (2025) The Diverging Impact of Climate Policy Intensity and Climate Adaptation Readiness on U.S. Bank Performance and Risk. Journal of Environmental Management. 394: 127357.
Link to publisher’s version
Link to published version
Link to Version of Record
https://doi.org/https://doi.org/10.1016/j.jenvman.2025.127357
Type
Article
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