Financing the transition to greenhouse gas neutrality: Is the German banking system prepared?

Claudio Baccianti, Markus Baltzer, Nils Boesel, David Finck, Tim Hagemann, Laura-Chloé Kuntz, Friso van der Meyden, Carina Schlam, Dominik Schober and Robert Unger

No 01/2026, Technical Papers from Deutsche Bundesbank

Abstract: Achieving Germany's goal of greenhouse gas neutrality by 2045 requires a shift to non-fossil energy sources and low-carbon production and consumption patterns. This transformation necessitates substantial investments. According to existing evidence, estimates of additional investment needs - beyond replacement investments - range between 2% and 4% of GDP per annum. This study explores the capacities of the German banking system to finance these additional investment requirements. We conclude that the German banking sector's, given solid excess capital and assuming frictionless credit allocation between banks, is capable of financing these additional investments even under conservative assumptions. However, the results of firm and household surveys conducted by the Bundesbank show that in both groups, a majority is reluctant to decarbonize and undertake the necessary investments in the coming years.

Keywords: Banks; Capital regulation; Climate investment; Net-zero emission pathways (search for similar items in EconPapers)
JEL-codes: G21 G28 G31 Q43 Q54 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubtps:342511

DOI: 10.71734/TP-2026-1

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