The impact of blue and green lending on credit portfolios: a commercial banking perspective

Nawazish Mirza, Muhammad Umar, Rashid Sbia and Mangafic Jasmina
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Nawazish Mirza: Excelia Group | La Rochelle Business School
Rashid Sbia: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique
Mangafic Jasmina: UNIVERSITY OF SARAJEVO - UNIVERZITET U SARAJEVU

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Abstract: Purpose The blue and green firms are notable contributors to sustainable development. Similar to other businesses in circular economies, blue and green firms also face financing constraints. This paper aims to assess whether blue and green lending help in optimizing the interest rate spreads and the likelihood of default. Design/methodology/approach This analysis is based on an unbalanced panel of banks from 20 eurozone countries for eleven years between 2012 and 2022. The key indicators of banking include interest rate spread and a market-based probability of default. The paper assesses how these indicators are influenced by exposure to green and blue firms after controlling for several exogenous factors. Findings The results show a positive relationship between green and blue lending and spread, while there is a negative link with the probability of default. This confirms that the blue and green exposure positively supports the credit portfolio both in terms of profitability and risk management. Originality/value The banking system is among the key contributors to corporate finance and to enable continuous access to sustainable finance, the banking firms must be incentivized. While many studies analyze the impact of green lending, to the best of the authors' knowledge, this study is among the very few that extend this analysis to blue economy firms

Keywords: Blue economy; Green lending; Credit portfolios; Probability of default (search for similar items in EconPapers)
Date: 2024-04-02
Note: View the original document on HAL open archive server: https://hal.science/hal-04678730v1
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Citations: View citations in EconPapers (1)

Published in Review of Accounting and Finance, 2024, ⟨10.1108/RAF-11-2023-0389⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04678730

DOI: 10.1108/RAF-11-2023-0389

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