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Are green loans less risky? Micro-evidence from a European Emerging Economy

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  • Neagu, Florian
  • Tatarici, Luminița
  • Dragu, Florin
  • Stamate, Amalia

Abstract

The role played by the banking sector in supporting the green transition has been limited but is expected to increase substantially. We investigate whether the green loans granted by Romanian financial institutions during the period from 2010 to 2020 bear less credit risk compared with other loans in their portfolio. In this respect, we use a novel micro database with information on all green loans granted by a representative share of Romanian financial institutions, combined with debtors’ financial statements. We use different approaches to control for the small share of green loans and find that firms with a sounder financial profile are more likely to access green loans. Using a matched sample of non-green loans, we are able to disentangle the factors that contribute to the increase in credit risk, but we do not observe a significant risk reduction in the case of green loans.

Suggested Citation

  • Neagu, Florian & Tatarici, Luminița & Dragu, Florin & Stamate, Amalia, 2024. "Are green loans less risky? Micro-evidence from a European Emerging Economy," Journal of Financial Stability, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:finsta:v:70:y:2024:i:c:s1572308923001080
    DOI: 10.1016/j.jfs.2023.101208
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    Cited by:

    1. Garcia-Villegas, Salomon & Martorell, Enric, 2024. "Climate transition risk and the role of bank capital requirements," Economic Modelling, Elsevier, vol. 135(C).

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    More about this item

    Keywords

    Financial stability; Corporate lending; Credit risk; Green loans; Micro data;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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