We document that lenders react to domestic climate policy stringency by increasing cross-border lending. We use granular fixed effects to control for loan demand and an instrumental variable strategy to establish causality. Consistent with regulatory arbitrage, the positive effect decreases in...

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...