The relationship between climate change, macroeconomic indicators and bank performance

This study is pursuing research on the influence of climate change and macroeconomic factors on bank performance is essential for risk management, long-term sustainability, regulatory compliance, reputation management, and strategic planning. It also aligns banks with global efforts to address climate change and its potential economic consequences. The study makes use of quantitative analysis using secondary data sourced from Iress, IMF database, SARB and the data was collected in quarterly format from 2000 to 2022. The study applied the multiple regression analysis, and the aim was to create a model that connects climate change to banks performance. Climate affect macroeconomic indicators which affect banks or climate change affect banks directly. The model uses climate change and macroeconomic variables as inputs, and the climate change variables were obtained from the two sources namely the climate watch online platform (greenhouse gas emission) and the World Bank climate knowledge portal (temperature and precipitation) emission) and the World Bank climate knowledge portal (temperature and precipitation). Macroeconomic inputs variables include inflation, changes in economic output and exchange rates. The data variables were gathered from Iress, IMF database and the SARB. The analysis of the data was done through statistical software called EViews. The findings revealed that both measures of climate change have a negative effect on bank performance thus profitability. The results also indicated that growth as measured by GDP and inflation are important factors determining the performance of the bank performance. The results obtained imply that policies aimed at mitigating the effects of climate change on the bank performance should be pursued.