Climate stress tests, bank lending, and the transition to the carbon-neutral economy / Larissa Fuchs, Huyen Ngyuen, Trang Nguyen, Klaus Schaeck ; editor: Halle Institute for Economic Research (IWH) - Member of the Leibniz Association
VerfasserFuchs, Larissa ; Ngyuen, Huyen ; Nguyen, Trang ; Schaeck, Klaus
KörperschaftLeibniz-Institut für Wirtschaftsforschung Halle
ErschienenHalle (Saale), Germany : Halle Institute for Economic Research (IWH) - Member of the Leibniz Association, March 2024
Umfang1 Online-Ressource (III, 53 Seiten, 0,79 MB) : Diagramme
Literaturverzeichnis: Seite 31-34
SerieIWH-Diskussionspapiere ; 2024, no. 9 (March 2024)
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Does banking supervision affect borrowers‘ transition to the carbon-neutral economy? We use a unique identification strategy that combines the French bank climate pilot exercise with borrowers‘ carbon emissions to present two novel findings. First climate stress tests actively facilitate borrowers‘ transition to a low-carbon economy through a lending channel. Stress-tested banks increase loan volumes but simultaneously charge higher interest rates for brown borrowers. Second additional lending is associated with some improvements in environmental performance. While borrowers commit more to reduce carbon emissions and are more likely to evaluate environmental effects of their projects they neither reduce direct carbon emissions nor terminate relationships with environmentally unfriendly suppliers. Our findings establish a causal link between bank climate stress tests and borrowers‘ reductions in transition risk.