Abstract
The effects of climate change on the South Africa economy are inevitable. Given this background,
the study sought to investigate the effect of climate change on banking sector performance in South
Africa employing quarterly data from 2003 to 2022 for 5 banks. The study employed the
ARDL/PMG model given the nature of the data. The study employed Return on Assets, Return on
Equity and Net Interest Margin as measures of banking sector performance. On the other hand,
Climate change is measured by Temperature at 2 Meters (T2M) and Precipitation Sum Average
(PSA). Several control variables were also employed in the study which include Unemployment
rate, Inflation (measured by CPI), Economic growth (GDP growth rate), Real Effective Exchange
rate (Reer) and balance of trade. The empirical results revealed that both measures of climate change
have a negative effect on banking sector performance in South Africa. The results also indicated that
growth as measured by GDP and inflation are important factors determining the performance of
the banking sector in South Africa. The results obtained imply that policies aimed at mitigating the
effects of climate change on the banking sector in South Africa should be pursued.