Climate change risk-related awareness and credit risk in the South African banking system

This paper investigates the relationship between climate and environmental (C&E) engagement and credit risk in the South African banking sector over the period 2008–2023. Although climate-related risks are increasingly recognised as a material threat to financial stability, empirical evidence, especially in emerging markets, remains limited. South Africa presents a unique environment, characterised by high exposure to physical and transition climate risks, and associated with a soft-law, principles-based disclosure regime. Using this setting, we develop a novel text-based indicator of C&E engagement by analysing the C&E