Do Natural Disasters Reduce Loans to the More CO 2 -Emitting Sectors?

Antonio Forte, Selay Sahan and Damiano B. Silipo ()
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Selay Sahan: Central Bank of the Republic of Turkey, 34435 Istanbul, Turkey
Damiano B. Silipo: Dipartimento di Economia, Statistica e Finanza, Università della Calabria, 87036 Rende, Italy

Sustainability, 2024, vol. 16, issue 10, 1-24

Abstract: We studied the impact of major floods occurring in Turkey between 2005 and 2020 on lending and the allocation of loans between sectors that differ in their CO 2 emissions. Our evidence shows that the floods are not significant determinants of lending or the allocation of loans between sectors, even though CO 2 emissions contribute to the reallocation of loans from the more polluting to the less polluting sectors. Indeed, risks and returns of the sector remain the main determinants of lending and of the allocation of loans among sectors. The results are robust to alternative estimation methods and specifications of the econometric models. Since in the period of investigation no environmental regulations were implemented in Turkey, and the Paris Agreement was ratified only at end-2021, the evidence suggests that more stringent regulations and green policies are required to accelerate the green transition in Turkey.

Keywords: climate change; floods; transition risk; credit allocation; Paris agreement (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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