Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/297423 
Year of Publication: 
2023
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2023-38
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We study whether the credit default swap (CDS) spreads of firms reflect the risk from climate transition. We first construct a climate transition risk (CTR) factor by using information on the vulnerability of a firm's value to the transition to a low-carbon economy. We then document how this factor shifts the term structure of the CDS spreads of more vulnerable firms but not of less vulnerable firms. Considering the impact of different climate transition policies on the CTR factor, we find that these policies have asymmetric and significant economic impacts on the credit risk of more vulnerable firms, and negligible effects on other firms.
Subjects: 
Climate change
Credit risk management
Econometric and statistical methods
JEL: 
C24
G12
G32
Q54
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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