Effect of weather and environmental attentions on financial system risks: Evidence from Chinese high- and low-carbon assets

Physical and transition risks from climate change have potential impacts on financial markets. This study in-vestigates systemic risks between high-and low-carbon assets and other sector assets and explores the effects of various weather and environmental factors on the financial systemic risks by employing the TENET and DMA models. We find that smaller results for systemic and spillover risks of high-and low-carbon assets will be ob-tained if weather and environmental attention are considered in the model. More importantly, weather and environmental attention influence the systemic risks of high-and low-carbon assets in different ways. Increased weather attention causes a decline (rise) in the risk spillovers of high-carbon (low-carbon) assets, while increased environmental attention leads to a rise (decline) in the risk spillovers of high-carbon (low-carbon) assets. Moreover, the impact of weather and environmental attention on systemic risks gradually weakened over time.