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Do banks fuel climate change?

Alessio Reghezza (), Yener Altunbas (), David Marques-Ibanez, Rodriguez d’Acri, Costanza and Martina Spaggiari

Journal of Financial Stability, 2022, vol. 62, issue C

Abstract: Do climate-oriented regulatory policies affect the flow of credit towards polluting firms? We match loan-level data to firm-level greenhouse gas emissions to assess the impact of the Paris Agreement. We find that, following this agreement, European banks reallocated credit away from polluting firms in relative terms. Specifically, euro area banks’ loan share to more polluting firms decreased by about 3percentage points compared to less polluting (or “green”) firms after the 2015 Paris Agreement (COP21). This result is stronger for banks that are well capitalized, have lower credit quality, and are less profitable.

Keywords: Climate change; Paris agreement; Loan-level data; Difference-in-differences (search for similar items in EconPapers)
JEL-codes: E51 G28 H23 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.jfs.2022.101049

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