Global Bank Lending under Climate Policy

Asli Demirguc-Kunt, Alvaro Enrique Pedraza Morales, Fredy Pulga and Claudia Ruiz Ortega

No 10266, Policy Research Working Paper Series from The World Bank

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 4.6 percent following an increase of 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 might be a win-win strategy for policymakers—in addition to addressing carbon emission reduction, climate-related initiatives also appear to attract foreign capital from lenders with strong preferences for green assets.

Date: 2022-12-15
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Related works:
Journal Article: Global Bank Lending Under Climate Policy (2024)
Working Paper: Global Bank Lending under Climate Policy (2023)
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