Effects of Climate Physical Risk on Households’ Asset Allocations: Empirical Study Based on 2017–2023 China Household Finance Survey Data

Abstract Climate change has intensified the frequency and economic impact of natural disasters, raising growing concerns about how climate physical risks (CRL) influence household financial behavior. However, micro-level evidence on this relationship remains limited. Using provincial disaster-loss data and household-level survey data for 2017–2023, this study examines the association between climate physical risk and household asset allocation. The results showed that climate risk is significantly associated with a lower share of financial assets (FAR) and a higher share of nonfinancial assets (NFAR), indicating a defensive portfolio adjustment. Within financial portfolios, climate risk correlates with more cash (CASH) and fewer stocks (STOCK), and agricultural assets (AGR) are also lower, consistent with their vulnerability to climate shocks. The effects are more pronounced among urban households and vary across regions with different climate exposures. Financial literacy and age strengthen these defensive adjustments, whereas higher risk preference weakens them. By linking disaster-induced economic losses with nationally representative household data, we provide new micro-level evidence on the transmission of climate risk through household portfolios and offer policy insights for strengthening climate-resilient financial systems in developing economies.