Climate risks and economic activity in France: Evidence from media coverage

This study investigates the impact of climate risks on economic activity in France. Using natural language processing methods on three major French newspapers (Le Monde, Les Echos, and Le Figaro) from 2000 to 2023, we construct a measure of climate risks that we disentangle into physical and transition-risk components. Our findings highlight several transmission channels through which climate risks affect the economy: the business cycle channel, the precautionary savings channel, the inflation channel, and the banking/credit channel. Moreover, while we document the existence of heterogeneous responses to our measures of physical and transition risks, we find that the tone of media coverage of climate risks matters beyond the frequency of published articles. These results remain robust to newspapers’ political slant and ruling political parties’ orientation. Finally, the impact of climate risks also depends on the stringency of environmental policies, with more lenient policies leading to a stronger sensitivity of our economic and financial variables to the media-related climate risk index.