2024 AFA Meeting in San Antonio - upcoming presentation by Filippo De Marco, Nicola Limodio

Climate, Amenities and Banking: El Niño in the US

Filippo De Marco, Nicola Limodio

Accepted for presentation at 2024 AFA Meeting in San Antonio


This paper investigates how a climate shock affects the banking system. Our empirical strategy exploits El Niño, a natural experiment producing quasi-random variation in climate across US counties. We find that El Niño deteriorates the value of natural amenities in the affected counties, reducing house prices and mortgage lending. These local effects aggregate at the bank level and induce exposed banks to change their mortgage lending even in unaffected counties. We identify the characteristics of climate-resilient banks through a LASSO analysis and find that banks with a lower operating leverage are less affected by climate shocks.