RESEARCH PROPOSAL PH.D APPLICATION
Yi Zhang
1. Proposed Title
Effects of Climate Risk on Corporate Default Risk: Analyzing the Impact Mechanisms of Physical Climate Risks and Environmental Policies
2. The reasons why you consider yourself suitable for the research lines of your interest
I am well-suited for research in climate risk and corporate default risk due to my comprehensive academic and professional background in finance and management. I hold an MSc in Global Finance and Banking from King’s College London, where I graduated with Merit, and a BSc in Accounting and Management from Queen Mary University of London. My academic training has provided me with a solid understanding of financial markets, company valuation,
and corporate governance. Currently, I am pursuing a Master’s in Management, Organization,
and Business Economics, where I have developed proficiency in using Stata and R Studio for
quantitative analysis, essential tools for the proposed research.
Professionally, I have gained substantial experience in financial management and risk
assessment through roles at SHEIN, Cutlite Penta Srl, and the Industrial and Commercial Bank
of China in Milan. My responsibilities included managing cash flows, transaction monitoring,
risk assessment, and compliance, all of which have equipped me with the skills necessary to
analyze how climate risks impact corporate financial stability.
With a blend of strong academic qualifications and relevant professional experience, I am confident in my ability to contribute meaningfully to research that explores the intersection of
climate risk and corporate default risk.
3. Scope and background of the problem to be investigated
Scope and Background
Climate change poses significant risks to businesses worldwide, with potential impacts that can
be classified into three main categories: physical risks, transitional risks, and liability risks.
Physical risks include immediate threats from extreme weather events and long-term changes such as sea level rise. Transitional risks arise from regulatory and policy changes aimed at mitigating climate impacts, while liability risks stem from failures to comply with evolving
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legal expectations and standards. The financial stability of firms is directly affected by these risks, as they impact cash flows, capital, and overall solvency.
According to the Intergovernmental Panel on Climate Change (IPCC, 2021), climate change is expected to result in severe weather events and significant environmental transformations,
leading to substantial economic losses across various sectors. Martinich and Crimmins (2019)
estimate that the U.S. alone could face a loss of USD 520 billion due to global temperature rise.
This study aims to explore the extent to which climate risks, specifically physical risks like extreme weather events and sea level rise, are reflected in corporate default risk.
Relevance to Research Line(s)
This research aligns with the broader field of environmental finance and climate economics,
contributing to the understanding of how environmental policies and extreme weather events influence corporate financial health. It seeks to expand the theoretical framework by integrating
environmental risks into corporate default risk analysis, enhancing methodologies for assessing
climate-related financial impacts.
4. Problem that must be investigated
Problem Statement
The primary objective of this research is to analyze the extent to which physical climate risks,
such as extreme weather events and sea level rise, are captured by firms’ default risk.
Additionally, the study will investigate whether firms’ environmental policies and behavior
moderate the transmission of these climate risks into default risks.
We will consider different scenarios of physical risk, as well as different horizons. Moreover,
we will take into account physical risk as an aggregate measure but also distinguish by types of physical risk.
Since the literature contains several measures of credit risk, we will study whether the impact of physical risk is similar for all the measures or if, contrary to this, there are some differences,
and if so, what the reasons are.
Finally, we will take into account different categories of firms, depending on the industry,
country, level of profitability, solvency, etc.
Key Questions 1. How do different types of physical climate risks, such as extreme weather events and sea level rise, impact firms’ credit risk?
2. Do firms’ environmental policies and behavior mitigate the transmission of physical climate risks to their default risk?
5. Study design
Research Design
To address these questions, I will employ a quantitative research approach using firm-level data from reputable sources such as Eikon-Refinitive and S&P Capital IQ Pro databases. Data will include firms of different countries and industry. The dependent variable will be firms’ credit risk, measured by using alternative measures, depending on the availability of data and the suitability of the credit-risk measure. Independent variables will include the scores for physical risk, and firm-specific characteristics such as environmental data, as well as size, leverage,
profitability, and geographical diversification.
Methodology
The analysis will involve sophisticated statistical tools such as R and Stata for regression
analysis and hypothesis testing. Panel data analysis techniques, including random effects, fixed
effects, and instrumental variable estimates, will be used to address potential endogeneity and
unobserved heterogeneity. We will also use Matlab to apply some models for assessing credit risk.
Data Collection
The study will cover a significant sample period to capture variations caused by major climate events and regulatory milestones. Data will be sampled annually or quarterly to maintain
statistical power and ensure meaningful analysis. Potential issues with missing data, database integration, and data cleansing will be systematically addressed.
As already mentioned, the information will be obtained from different databases, available through the research project linked to the doctoral application.
6. Importance/Need of the study
Significance
This research is crucial for advancing the field of environmental finance and enhancing our
understanding of the financial implications of climate risks. Previous research is made mainy with data of climate events, that is, realized events. Instead, in this project we start from physical risk, quantified by aggregate indexes. Investigating how physical climate risks affect corporate default risk, this study provides valuable insights for policymakers, financial analysts,
and corporate managers to develop effective risk management strategies. The findings will contribute to the theoretical framework by integrating environmental risks into credit risk
analysis and inform sustainable financial practices.
Practical Implications
Upon completion of this research, we will have a deeper understanding of how climate-related
risks influence corporate solvency. This knowledge will aid in improving risk management tactics, advising investors, and shaping regulatory compliance, ultimately leading to a more resilient and informed financial landscape.
References
Intergovernmental Panel on Climate Change (IPCC). (2021). Climate Change 2021: The Physical Science Basis. Contribution of Working Group I to the Sixth Assessment Report of
the Intergovernmental Panel on Climate Change [Masson-Delmotte, V., et al.]. Cambridge
University Press.
Martinich, J., & Crimmins, A. (2019). Climate damages and adaptation potential across diverse sectors of the United States. Nature Climate Change, 9, 397–
404. https://doi.org/10.1038/s41558-019-0444-6
Nguyen, Q., Diaz-Rainey, I., and Kuruppuarachchi, D. (2023). In search of climate distress risk.
International Review of Financial Analysis, 85 (2023): 102444.
Zurich (2021). Here’s how climate change will impact businesses everywhere – and what can
be done. Retrieved from www.zurich.com.   this is my previous cover letter and research proposal but now im applying another university with this research themes Global and Environmental Health Economics
The Global and Environmental Health Economics Group conducts high-quality, policy-relevant research with a focus on the Asia-Pacific region. We seek to improve the health and wellbeing of people and communities across the region - promoting sustainable development and resilience to climate change. Collaboration across disciplines, sectors and countries is crucial to this mission.

Our researchers seek to understand drivers for improved health and wellbeing for people living in developing countries; including education, health financing and access to health services.

In line with this goal, we investigate the allocation and effectiveness of health aid to identify the different priorities of key stakeholders and improve health aid allocation decisions.

We also work with governments and development partners in the Asia-Pacific region to help improve access to health services, including in the Solomon Islands and in Papua New Guinea.

We seek to determine how environmental factors and changing climate conditions impact people’s lives in the Asia Pacific, including in Australia. For example, we are collaborating with partners in Indonesia and Fiji to reduce the range of environmental risks to health and wellbeing in informal settlements.

We collaborate with leading climate researchers in Australia and internationally to quantify the harmful impacts of pollution, natural disasters and extreme temperatures on the health and wellbeing of communities across Australia and the Asia-Pacific region.