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Climate transition risk and bank lending

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  • Brunella Bruno
  • Sara Lombini

Abstract

We investigate whether and how banks in the global syndicated loan market adjusted the pricing and supply of credit to account for higher climate transition risk (CTR) in the years following the 2015 Paris Agreement. We measure CTR by considering the pollution levels of borrowers and the engagement of countries where borrowers are headquartered in addressing climate change issues. The evidence is mixed and points to nonlinear relations between lending variables and CO2 emissions. Policy events such as the Paris Agreement and government environmental awareness are significant climate risk drivers that, when combined, may amplify banks' perception of CTR.

Suggested Citation

  • Brunella Bruno & Sara Lombini, 2023. "Climate transition risk and bank lending," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 46(S1), pages 59-106, December.
    • Handle: RePEc:bla:jfnres:v:46:y:2023:i:s1:p:s59-s106
    DOI: 10.1111/jfir.12360
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