Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/287752 
Year of Publication: 
2024
Series/Report no.: 
IWH Discussion Papers No. 9/2024
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
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.
Subjects: 
climate change
climate stress test
green finance
syndicated loans
JEL: 
G21
G28
K11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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