Does Extreme Climate Risk Damage Urban Financial Resilience? Evidence from China

In recent years, frequent extreme climate events have not only greatly intensified financial system volatility, but may have damaged urban financial resilience and hindered the sustainable development of cities. This paper examines the effects of extreme climate risk on urban financial resilience and further discusses its heterogeneous characteristics and transmission mechanisms, using the data from Chinese prefecture-level cities. The empirical findings show that, first, extreme climate risk significantly weakens urban financial resilience. Second, heterogeneity analyses reveal that extreme climate risk has a more significant effect on the financial resilience of northern cities, small-population cities and low-marketization cities. Finally, mechanism tests indicate that extreme climate risk negatively affects urban financial resilience by reducing asset liquidity, increasing energy consumption, and exacerbating climate policy uncertainty. The research findings provide solid empirical evidence for policymakers to formulate targeted financial policies, strengthen systemic risk management, and enhance urban financial resilience, so as to promote the coordinated and sustainable development of the urban economy and ecological environment.