This doctoral thesis explores the intersection of financial macroeconomics and climate risk through three chapters that cover different geographical contexts and risk dimensions. The first chapter, “Financial Institutions and Climate Shocks: Pre-emptive vs. Reactive Lending Adjustments in the Case of El Niño”, uses granular, loan-level data from Peru to demonstrate that financial institutions engage in forward-looking climate risk management. This is achieved by responding to forecast revisions rather than reacting to actual disasters. This finding reveals a new channel through which climate uncertainty influences financial markets. The second chapter, “The Impact of Natural Disasters on Capital Flows: Preparedness and Exposure Matter”, analyses international capital flows and finds that investors react to countries' disaster preparedness rather than just disaster risk. During disasters, capital leaves or stops arriving in unprepared countries and is reallocated to safer markets within country groups. The third chapter, “The Impact of Renewable Portfolio Standards on Greenfield Environmental Technology Investment and Employment”, provides empirical evidence that a US climate policy that increases renewable energy requirements for electricity providers effectively delivers new investment and job creation, albeit with benefits that materialise over six to eight years and eventually plateau. Together, these studies advance our understanding of how climate information flows through financial systems and influences investment decisions at various scales, ranging from individual loans to international capital flows.
