Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334974 
Year of Publication: 
2025
Series/Report no.: 
ECB Working Paper No. 3089
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
How does environmental, social and governance regulation of banks affect capital provision to the sustainability transition? As ambitious sustainability targets face funding challenges, the financial sector is tasked with channeling more private capital into sustainable investments. However, scaling sustainable technologies often requires investment in non-ESG-compliant assets. The mobility transition to electric vehicles, for example, demands increased supply of battery raw materials like Lithium, Cobalt, Manganese, and Nickel. This paper analyzes how ESG regulation impacts capital provision to mining companies supplying these materials. Concretely, we assess effects of the European Union's Sustainable Finance Disclosure Regulation and of the Taxonomy on banks' public holdings and cost of capital, using two large, novel data sets. We find that the introduction of the ESG regulations has a dampening effect on banks' holdings in battery raw material mining companies, in particular those with poor ESG performance. The companies' cost of capital and lending behavior remain unchanged.
Subjects: 
Banking
ESG Regulation
Lending
Public Holdings
Sustainable Finance
JEL: 
G21
G28
Q50
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-7403-5
Document Type: 
Working Paper

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