Global Bank Lending Under Climate Policy

Asli Demirguc-Kunt, Alvaro Pedraza (), Fredy Pulga () and Claudia Ruiz-Ortega ()
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Alvaro Pedraza: World Bank
Fredy Pulga: Universidad de la Sabana
Claudia Ruiz-Ortega: World Bank

IMF Economic Review, 2024, vol. 72, issue 2, No 8, 858-901

Abstract: Abstract What is the response of bank foreign subsidiaries to climate policy in their host countries? This paper finds that global banks with high environmental performance increase their presence in countries after local authorities strengthen their climate-related actions. Through their foreign subsidiaries, these banks expand their credit by up to 5.2 percent following an increase in the one standard deviation in the host country’s climate policy index. Importantly, the paper does not find evidence that banks with low environmental scores exit in response to climate initiatives. The findings show that strengthening climate policy may also have other benefits—in addition to addressing carbon emission reduction, climate-related initiatives also appear to attract foreign capital from lenders with strong preferences for green assets.

JEL-codes: D62 G21 G28 Q54 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Global Bank Lending under Climate Policy (2023)
Working Paper: Global Bank Lending under Climate Policy (2022)
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DOI: 10.1057/s41308-023-00217-8

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