Green granular borrowers

Margherita Bottero (margherita.bottero@bancaditalia.it) and Michele Cascarano
Additional contact information
Margherita Bottero: Bank of Italy

No 1471, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We examine how a bank's lending policies are affected when its large (granular) borrowers unexpectedly reduce their emissions. First, we document that these borrowers are valuable to the bank and, when their emissions fall below the expected levels, they are rewarded with lower interest rates on short-term loans. Second, we show that, when aggregated at the bank-sector level, these emission shocks significantly affect the returns on banks' loan portfolios, but only when they capture a reduction in emissions. Finally, we find that, following a negative emission shock by large borrowers, banks increase their lending to non-granular borrowers in sectors more engaged in the green transition, which are likely to offset lost margins. Overall, these results suggest that banks allow negative emission shocks from large borrowers to spill over into loan supply to green sectors, facilitating the green transition.

Keywords: granular borrower; climate; green lending; spillover (search for similar items in EconPapers)
JEL-codes: G21 G32 Q54 (search for similar items in EconPapers)
Date: 2024-12
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bancaditalia.it/pubblicazioni/temi-dis ... 471/en_tema_1471.pdf (application/pdf)

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:bdi:wptemi:td_1471_24

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by (angela.barbaro@bancaditalia.it).