We examine whether and how lending banks around the world respond to borrowers' carbon emissions – the major contributors to global warming – in their lending decisions. We find that banks charge a higher loan spread and apply stricter non-price terms to borrowing firms with larger direct...

We ask if bank supervisors’ efforts to combat climate change affect banks' lending and their borrowers’ transition to the carbon-neutral economy. Combining information from the French supervisory agency’s climate pilot exercise with borrowers' emission data, we first show that banks that...

We document that European banks charge higher interest rates on loans granted to small and medium-sized firms located in areas at high risk of flooding. At 6 basis points, the average risk premium does not adequately reflect the deterioration of loan performance in the aftermath of flood...

We identify the effect of climate change-related regulatory risks on credit reallocation, Our evidence suggests that effects depend borrower's region, Following an increase in salience of regulatory risks, banks reallocate credit to US firms that could be negatively impacted by regulatory...

I propose a simple indicator of climate-related transition risks of banks’ lending activity based on transaction-level loan data. The underlying idea is that the higher the greenhouse gas intensity of an economic activity (and so a debtor), the higher its transition risk. Recent Hungarian...

Does banking supervision affect borrowers‘ transition to the carbon-neutral economy? We use a unique identification strategy that combines the French bank climate pilot exercise with borrowers‘ carbon emissions to present two novel findings. First, climate stress tests actively facilitate...

We study how banks’ climate sentiments affect their lending decisions and economic decarbonization.Banks can form expectations about firms’ performance in the low-carbon transition either in a backwardlooking(firms’ GHG emissions) or forward-looking way (firms’ technology alignment). We...

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...