Climate policy and brown risk premium on bank loans: Direct vs. indirect emissions

Ville Tolkki, Juha Junttila and Petri Sahlström

No 5/2026, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: The paper studies how climate policy affects the brown risk premium in bank lending, distinguishing between Scope 1 (direct) and Scope 2 (energy-related) emissions using loanlevel data on new variable-rate corporate loans from 2019-2024 matched with constructed measures of Scope 1 and Scope 2 emission intensity. Exploiting the Finnish Climate Act of 2022, which set a binding 2035 net-zero target, we show that Scope 1 emissions are priced throughout the sample, indicating pre-existing risk pricing, while Scope 2 emissions are priced mainly after the policy, suggesting an expansion of priced transition risks. We further isolate periods of acute energy market stress and find that banks temporarily deprioritize carbon risk during energy crisis months. Estimated carbon premia are economically meaningful, but we do not find strong evidence that pricing differs systematically between large and small firms.

Keywords: Banking; corporate loan pricing; climate policy (search for similar items in EconPapers)
JEL-codes: G21 G32 Q54 Q58 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:342401

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