Three-Layer Climate Risk Absorption in China's Corporate Bond Market: Diagnostic Evidence from Interbank Medium-Term Notes

Abstract

We study the institutional channels through which climate risk is absorbed before reaching the primary-market coupon of Chinese interbank medium-term notes (MTNs). We develop a three-layer absorption frameworkcredit ratings, third-party guarantees, and implicit state supportand implement its diagnostic protocol on a fully public, reproducible 12-city prototype that combines 4,130 NOAA station-day weather records for 2024 with 1,667,274 ChinaBond rating-curve observations for 20202025. Three results emerge. First, rating-implied funding costs are sharply compressed at the AAA end (2.232.31%) and dispersed at the A end (8.5610.90%), mirroring the issuer-level rating compression documented for the 1,468-MTN universe. Second, physical climate exposure sorts signi cantly across all three institutional layers: AAA status, state ownership, and guarantee ags each separate climate risk at the 5% level, and all three comparisons survive BenjaminiHochberg falsediscovery-rate correction. Third, a one-standard-deviation increase in physical climate risk is associated with a 3.01-percentage-point higher rating-implied coupon (R2 = 0.67; HC1 p < 0.001) that is robust across seven pre-speci ed variations of the extreme-day thresholds, the yield tenor, the polar-city sample, mid-tier rating assignments, and CRI weights, and the guarantee and rating interactions carry the predicted negative absorption signs. A 5,000-draw placebo permutation con rms that the interaction sign template is not an artifact of arbitrary ag assignment, while making explicit that con rmatory interaction inference requires the 1,468-MTN companion sample. The results locate the climate-pricing null of primary markets in the ratingguarantee ownership architecture rather than in investor inattention, with direct implications for disclosure-based climate policy.

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