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

Abstract

This paper investigates the relationship between climate adaptation readiness and performance of banks around the world 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, state-owned banks 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, the effects of foreign ownership on the relationship between climate adaptation readiness and bank performance are insignificant and inconsistent for banks in both developing and developed countries. this suggests that foreign-owned banks face difficulty in utilizing the benefits of climate adaptation compared to domestic banks.