Green Banking—Can Financial Institutions support green recovery?

Zhonglu Chen, Nawazish Mirza, Lei Huang and Muhammad Umar

Economic Analysis and Policy, 2022, vol. 75, issue C, 389-395

Abstract: The outbreak of the Covid-19 pandemic has impeded the transition to sustainability and net-zero targets. The immediate focus on health-related issues limits the progress of the pro-ecological initiatives. Financial institutions can play a pivotal role in supporting green recovery, notably in emerging markets. This paper evaluates the incentives of sustainable financing for banking firms in member states of the Gulf Cooperation Council. Using a comprehensive sample of banks between 2011 and 2021, we report that increasing green exposure will improve the intermediation spread. Similarly, when banks have environmental considerations for extending loans, their risk of default will reduce. The impact of green financing is more profound for smaller banks indicating that responsible lending provides them with new earning avenues while mitigating the risk. The findings are reassurance for green recovery, and because of the explicit benefits, banks can play a critical role in helping in achieving sustainable development goals. The results have important implications for regulators, monetary authorities, and the banking sector since green financing can lead to more efficient and resilient financial systems.

Keywords: Green recovery; Sustainable loans; Spread; Default risk (search for similar items in EconPapers)
JEL-codes: G20 G21 G29 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0313592622000844
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:75:y:2022:i:c:p:389-395

DOI: 10.1016/j.eap.2022.05.017

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().