Loan guarantee and portfolio greening: evidence from European credit registers

Bruno Buchetti, Ixart Miquel-Flores, Salvatore Perdichizzi, Alessio Reghezza () and Luca X. Lin

No 2916, Working Paper Series from European Central Bank

Abstract: Using pan-European credit register data, we analyze the sharp increase in public guaranteed lending (PGL) during the COVID-19 loan guarantee programs and show that banks leverage PGL to expand lending to low-emission firms. This behavior is driven by industries less affected by COVID-19, banks with ”browner” portfolios, and younger firms. Notably, compared to high-emission firms, banks’ internal risk assessments in PGL to low-emission firms are less frequently updated and exhibit weaker predictive power for future credit quality deterioration, indicating lax monitoring efforts. These findings highlight the additional information production costs associated with green lending and shed light on why banks may be slow to transition to greener portfolios. JEL Classification: G20, G21, G28

Keywords: green lending; information production; public guaranteed loans (search for similar items in EconPapers)
Date: 2024-03
New Economics Papers: this item is included in nep-ban, nep-eec, nep-ene, nep-env and nep-sbm
Note: 2642726
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20242916

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