Firms’ climate risks and bank lending: Evidence from the COVID-19 crisis

Masayo Shikimi

Finance Research Letters, 2025, vol. 73, issue C

Abstract: Climate risks influence banks' lending behavior during the COVID-19 pandemic. Our study uses Japanese data to show that banks reduced lending to high CO2 intensity firms at the start of the crisis and the following year. However, banks that previously invested heavily in these firms increased their lending, especially to firms with significant declines in sales. Our results also reveal that banks' lending to high CO2 intensity firms varies according to their capital buffers. These findings hold even when considering zombie lending and bank relationships, indicating that banks took climate risks into account when reallocating funds during a liquidity shock.

Keywords: Transition risk; Transmission; Climate change; Bank lending; Risk management (search for similar items in EconPapers)
JEL-codes: G21 G32 P28 Q54 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324016350

DOI: 10.1016/j.frl.2024.106606

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