No Cover Image

Journal article 109 views 10 downloads

A climate stress testing exercise on loans to European small and medium enterprises

Yujia Chen Orcid Logo, Zhenghong Ding Orcid Logo, Luca Barbaglia Orcid Logo, Raffaella Calabrese Orcid Logo, Serena Fatica Orcid Logo

Energy Economics, Volume: 155, Start page: 109177

Swansea University Author: Zhenghong Ding Orcid Logo

  • 71420.VOR.pdf

    PDF | Version of Record

    © 2026 The Authors. This is an open access article distributed under the terms of the Creative Commons CC-BY license.

    Download (1.84MB)

Check full text

DOI (Published version): 10.1016/j.eneco.2026.109177

Abstract

We develop a micro-level climate stress testing framework to evaluate the financial performance of small business loans under diverse climate scenarios. Focusing on European small and medium-sized enterprises (SMEs), we estimate the impact of coastal, flash, and river floods on loan default risk usi...

Full description

Published in: Energy Economics
ISSN: 0140-9883 1873-6181
Published: Elsevier BV 2026
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa71420
first_indexed 2026-02-15T00:12:12Z
last_indexed 2026-03-17T05:37:10Z
id cronfa71420
recordtype SURis
fullrecord <?xml version="1.0"?><rfc1807><datestamp>2026-03-16T14:57:54.5597646</datestamp><bib-version>v2</bib-version><id>71420</id><entry>2026-02-15</entry><title>A climate stress testing exercise on loans to European small and medium enterprises</title><swanseaauthors><author><sid>c633af9f6171d3786b674b4d5a255f06</sid><ORCID>0000-0001-6962-5699</ORCID><firstname>Zhenghong</firstname><surname>Ding</surname><name>Zhenghong Ding</name><active>true</active><ethesisStudent>false</ethesisStudent></author></swanseaauthors><date>2026-02-15</date><deptcode>CBAE</deptcode><abstract>We develop a micro-level climate stress testing framework to evaluate the financial performance of small business loans under diverse climate scenarios. Focusing on European small and medium-sized enterprises (SMEs), we estimate the impact of coastal, flash, and river floods on loan default risk using a discrete-time survival model. Our analysis reveals that flood events significantly increase SME loan default probabilities in countries such as Spain and France. However, this effect is notably reduced in regions with strong infrastructure or effective support mechanisms. To complement the empirical findings, we conduct a forward-looking stress testing exercise that projects default probability trajectories under varying flood severity scenarios. This approach enables financial institutions and regulators to quantify the loan-level credit risk associated with climate-related flooding, offering valuable insights for risk management and policy design.</abstract><type>Journal Article</type><journal>Energy Economics</journal><volume>155</volume><journalNumber/><paginationStart>109177</paginationStart><paginationEnd/><publisher>Elsevier BV</publisher><placeOfPublication/><isbnPrint/><isbnElectronic/><issnPrint>0140-9883</issnPrint><issnElectronic>1873-6181</issnElectronic><keywords>Climate change; Loan default; Natural disasters; Risk modelling; Stress testing</keywords><publishedDay>1</publishedDay><publishedMonth>3</publishedMonth><publishedYear>2026</publishedYear><publishedDate>2026-03-01</publishedDate><doi>10.1016/j.eneco.2026.109177</doi><url/><notes/><college>COLLEGE NANME</college><department>Management School</department><CollegeCode>COLLEGE CODE</CollegeCode><DepartmentCode>CBAE</DepartmentCode><institution>Swansea University</institution><apcterm>Another institution paid the OA fee</apcterm><funders>Raffaella Calabrese was supported by Economic and Social Research Council [grant number ES/W010259/1].</funders><projectreference/><lastEdited>2026-03-16T14:57:54.5597646</lastEdited><Created>2026-02-15T00:04:06.0876768</Created><path><level id="1">Faculty of Humanities and Social Sciences</level><level id="2">School of Management - Accounting and Finance</level></path><authors><author><firstname>Yujia</firstname><surname>Chen</surname><orcid>0000-0002-5380-0189</orcid><order>1</order></author><author><firstname>Zhenghong</firstname><surname>Ding</surname><orcid>0000-0001-6962-5699</orcid><order>2</order></author><author><firstname>Luca</firstname><surname>Barbaglia</surname><orcid>0000-0001-5930-5392</orcid><order>3</order></author><author><firstname>Raffaella</firstname><surname>Calabrese</surname><orcid>0000-0002-0078-3151</orcid><order>4</order></author><author><firstname>Serena</firstname><surname>Fatica</surname><orcid>0000-0002-9990-4354</orcid><order>5</order></author></authors><documents><document><filename>71420__36390__98bc0a06d67e462cb90e6d8ff6339d41.pdf</filename><originalFilename>71420.VOR.pdf</originalFilename><uploaded>2026-03-11T14:57:52.2082988</uploaded><type>Output</type><contentLength>1926033</contentLength><contentType>application/pdf</contentType><version>Version of Record</version><cronfaStatus>true</cronfaStatus><documentNotes>&#xA9; 2026 The Authors. This is an open access article distributed under the terms of the Creative Commons CC-BY license.</documentNotes><copyrightCorrect>true</copyrightCorrect><language>eng</language><licence>http://creativecommons.org/licenses/by/4.0/</licence></document></documents><OutputDurs/></rfc1807>
spelling 2026-03-16T14:57:54.5597646 v2 71420 2026-02-15 A climate stress testing exercise on loans to European small and medium enterprises c633af9f6171d3786b674b4d5a255f06 0000-0001-6962-5699 Zhenghong Ding Zhenghong Ding true false 2026-02-15 CBAE We develop a micro-level climate stress testing framework to evaluate the financial performance of small business loans under diverse climate scenarios. Focusing on European small and medium-sized enterprises (SMEs), we estimate the impact of coastal, flash, and river floods on loan default risk using a discrete-time survival model. Our analysis reveals that flood events significantly increase SME loan default probabilities in countries such as Spain and France. However, this effect is notably reduced in regions with strong infrastructure or effective support mechanisms. To complement the empirical findings, we conduct a forward-looking stress testing exercise that projects default probability trajectories under varying flood severity scenarios. This approach enables financial institutions and regulators to quantify the loan-level credit risk associated with climate-related flooding, offering valuable insights for risk management and policy design. Journal Article Energy Economics 155 109177 Elsevier BV 0140-9883 1873-6181 Climate change; Loan default; Natural disasters; Risk modelling; Stress testing 1 3 2026 2026-03-01 10.1016/j.eneco.2026.109177 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University Another institution paid the OA fee Raffaella Calabrese was supported by Economic and Social Research Council [grant number ES/W010259/1]. 2026-03-16T14:57:54.5597646 2026-02-15T00:04:06.0876768 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Yujia Chen 0000-0002-5380-0189 1 Zhenghong Ding 0000-0001-6962-5699 2 Luca Barbaglia 0000-0001-5930-5392 3 Raffaella Calabrese 0000-0002-0078-3151 4 Serena Fatica 0000-0002-9990-4354 5 71420__36390__98bc0a06d67e462cb90e6d8ff6339d41.pdf 71420.VOR.pdf 2026-03-11T14:57:52.2082988 Output 1926033 application/pdf Version of Record true © 2026 The Authors. This is an open access article distributed under the terms of the Creative Commons CC-BY license. true eng http://creativecommons.org/licenses/by/4.0/
title A climate stress testing exercise on loans to European small and medium enterprises
spellingShingle A climate stress testing exercise on loans to European small and medium enterprises
Zhenghong Ding
title_short A climate stress testing exercise on loans to European small and medium enterprises
title_full A climate stress testing exercise on loans to European small and medium enterprises
title_fullStr A climate stress testing exercise on loans to European small and medium enterprises
title_full_unstemmed A climate stress testing exercise on loans to European small and medium enterprises
title_sort A climate stress testing exercise on loans to European small and medium enterprises
author_id_str_mv c633af9f6171d3786b674b4d5a255f06
author_id_fullname_str_mv c633af9f6171d3786b674b4d5a255f06_***_Zhenghong Ding
author Zhenghong Ding
author2 Yujia Chen
Zhenghong Ding
Luca Barbaglia
Raffaella Calabrese
Serena Fatica
format Journal article
container_title Energy Economics
container_volume 155
container_start_page 109177
publishDate 2026
institution Swansea University
issn 0140-9883
1873-6181
doi_str_mv 10.1016/j.eneco.2026.109177
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
hierarchytype
hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
active_str 0
description We develop a micro-level climate stress testing framework to evaluate the financial performance of small business loans under diverse climate scenarios. Focusing on European small and medium-sized enterprises (SMEs), we estimate the impact of coastal, flash, and river floods on loan default risk using a discrete-time survival model. Our analysis reveals that flood events significantly increase SME loan default probabilities in countries such as Spain and France. However, this effect is notably reduced in regions with strong infrastructure or effective support mechanisms. To complement the empirical findings, we conduct a forward-looking stress testing exercise that projects default probability trajectories under varying flood severity scenarios. This approach enables financial institutions and regulators to quantify the loan-level credit risk associated with climate-related flooding, offering valuable insights for risk management and policy design.
published_date 2026-03-01T05:34:14Z
_version_ 1860520330482679808
score 11.100061

Similar Items