Measuring climate-related financial market volatility in SADC (WP/25/21)

The transfer entropy estimates confirm that the impact of different climate variables on SADC nations’ financial markets is heterogeneous, segmented and influenced by local factors. Further, the wavelet coherence results confirm the presence of asymmetric lag/lead effects over different time horizons across SADC nations’ financial markets. Overall, the results show the importance of both short- and long-term climate-finance risk assessment and management measures. Moreover, they highlight the need for prudential policies, regulations, disclosure requirements and stress testing specific to the SADC region.