A global perspective on climate adaptation, ownership, and Bank performance

Abstract

This study looks into the connection among climate adaptation readiness and banks’ performance globally within the period of 18 years from 2002 to 2019. Additionally, we assess how ownership structure influences the impact of climate adaptation readiness on bank performance, specifically regarding profitability and credit risk. Our findings indicate that increased climate adaptation readiness generally enhances banks’ profitability and reduces credit risk. Regarding ownership, banks owned by government tend to outperform domestic privately-owned banks in countries with greater climate adaptation readiness. Notably, state-owned banks in developed countries achieve higher financial performance under climate adaptation readiness, while in developing countries, they experience lower credit risk. However, foreign ownership’s effect on the relationship among climate adaptation readiness and bank performance are insignificant and inconsistent among banks situated in developing and developed economies. This suggests that foreign-owned banks face difficulty in utilizing the benefits of climate adaptation readiness compared to domestic banks, potentially because of their attention on long-term strategies along with the support from governments and regulatory frameworks.