Loan pricing and biodiversity exposure: Nature-related spillovers to the financial sector

Annette Becker, Francesca Erica Di Girolamo and Caterina Rho

Research in International Business and Finance, 2025, vol. 75, issue C

Abstract: Biodiversity loss can have direct economic impacts, as it limits the availability of natural resources and increases costs across various industries. Biodiversity and nature-related risks can jeopardize creditworthiness of borrowers, and raises concerns for lenders, potentially leading to stricter lending conditions. This paper analyzes how these risks spread from the real economy to the syndicated loan market in the European Union and United Kingdom. We construct a country-level indicator of biodiversity exposure for EU lenders. Our findings show that the exposure of EU banks to biodiversity varies across countries, depending on the exposure level of borrowers and the loan volumes. Secondly, using data on syndicated loans from 2017 to 2022, we observe a positive and significant correlation between loan pricing and the level of biodiversity exposure of the borrower. These findings suggest that creditors are increasingly incorporating nature-related information into their financing decisions, allowing them to diversify and pool risks.

Keywords: Nature-related financial risk; Natural capital; Biodiversity; Ecosystem services; Double materiality; Financial sector; Banks; Debt financing; Syndicated loans; Loan pricing; Premium; International spillovers; Risk transmission; Borrower diversification; EU (search for similar items in EconPapers)
JEL-codes: C21 G21 G23 G32 Q51 Q57 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:75:y:2025:i:c:s0275531924005178

DOI: 10.1016/j.ribaf.2024.102724

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