Heterogeneous impacts of climate change news on China's financial markets

This paper investigates the influence of climate change news on China's major assets: stocks, exchange rates, treasury bonds and green bonds. Using 1.4 million articles from 2017 to 2022, we create climate change news indices (CCNIs) spanning natural disasters, climate governance, energy transition, climate cooperation, and climate communication. We establish CCNI–return and CCNI–value-at-risk connectedness networks for asset returns and extreme risks, respectively. The findings suggest a moderate effect of climate change news on Chinese financial markets. Both natural disasters and energy transition news affect treasury and green bond returns. Energy transition news notably influences extreme risks for green bonds. Dynamic analysis shows that policies related to climate governance and energy transition can affect treasury and green bond returns in specific periods, while negative news related to natural disasters and energy transition increase extreme risks for stocks and green bonds. Our study underscores the need to enhance China's green financial system in order to effectively address climate change.