IDEAS home Printed from https://ideas.repec.org/p/bfr/banfra/743.html
   My bibliography  Save this paper

Banks' climate commitments and credit to brown industries: new evidence for France

Author

Listed:
  • Jean-Stéphane Mésonnier

Abstract

In this paper, I investigate whether and how banks align green words with deeds in terms of credit allocation across more or less carbon-intensive industries in France. I use a rich dataset of bank credit exposures across some fifty industries and two size classes of borrowing firms for the main banking groups operating in France, which I merge with information on industries' greenhouse gas emission intensities and a score for banks' self-reported climate-related commitments over 2010-2017. I find evidence that higher levels of self-reported climate commitments by banks are associated with less lending to large corporates in the five brownest industries. However, lending to SMEs across more or less carbon-intensive industries remained unrelated to banks' commitments to green their business. Since SMEs are not required to report on their carbon emissions, while large firms are, these findings suggest that devising an appropriate carbon reporting framework for small firms is likely to enhance the decarbonization of bank lending.

Suggested Citation

  • Jean-Stéphane Mésonnier, 2019. "Banks' climate commitments and credit to brown industries: new evidence for France," Working papers 743, Banque de France.
    • Handle: RePEc:bfr:banfra:743
    as

    Download full text from publisher

    File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/wp743.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Marion AUBERT & William BACH & Sébastien DIOT & Lucas VERNET, 2019. "Les groupes bancaires français face au risque climatique," Analyse et synthèse 101, Banque de France.
    2. Boermans, Martijn A. & Galema, Rients, 2019. "Are pension funds actively decarbonizing their portfolios?," Ecological Economics, Elsevier, vol. 161(C), pages 50-60.
    3. Philipp Krueger & Zacharias Sautner & Laura T Starks, 2020. "The Importance of Climate Risks for Institutional Investors," The Review of Financial Studies, Society for Financial Studies, vol. 33(3), pages 1067-1111.
    4. Goss, Allen & Roberts, Gordon S., 2011. "The impact of corporate social responsibility on the cost of bank loans," Journal of Banking & Finance, Elsevier, vol. 35(7), pages 1794-1810, July.
    5. Christin Nitsche & Michael Schröder, 2018. "Are SRI funds conventional funds in disguise or do they live up to their name?," Chapters, in: Sabri Boubaker & Douglas Cumming & Duc K. Nguyen (ed.), Research Handbook of Investing in the Triple Bottom Line, chapter 19, pages 414-446, Edward Elgar Publishing.
    6. Crifo, Patricia & Sinclair-Desgagné, Bernard, 2014. "The Economics of Corporate Environmental Responsibility," International Review of Environmental and Resource Economics, now publishers, vol. 7(3-4), pages 279-297, December.
    7. Krüger, Philipp, 2015. "Corporate goodness and shareholder wealth," Journal of Financial Economics, Elsevier, vol. 115(2), pages 304-329.
    8. Rajna Gibson & Philipp Krueger, 2017. "The Sustainability Footprint of Institutional Investors," Swiss Finance Institute Research Paper Series 17-05, Swiss Finance Institute.
    9. Manthos D. Delis & Kathrin de Greiff & Steven Ongena, 2018. "Being Stranded on the Carbon Bubble? Climate Policy Risk and the Pricing of Bank Loans," Swiss Finance Institute Research Paper Series 18-10, Swiss Finance Institute, revised May 2018.
    10. Trinks, Arjan & Scholtens, Bert & Mulder, Machiel & Dam, Lammertjan, 2018. "Fossil Fuel Divestment and Portfolio Performance," Ecological Economics, Elsevier, vol. 146(C), pages 740-748.
    11. Juan Fernandez de Guevara & Joaquin Maudos, 2011. "Banking competition and economic growth: cross-country evidence," The European Journal of Finance, Taylor & Francis Journals, vol. 17(8), pages 739-764.
    12. Griffin, Paul A. & Jaffe, Amy Myers & Lont, David H. & Dominguez-Faus, Rosa, 2015. "Science and the stock market: Investors' recognition of unburnable carbon," Energy Economics, Elsevier, vol. 52(PA), pages 1-12.
    13. Gros, Daniel & Lane, Philip R. & Langfield, Sam & Matikainen, Sini & Pagano, Marco & Schoenmaker, Dirk & Suarez, Javier, 2016. "Too late, too sudden: Transition to a low-carbon economy and systemic risk," Report of the Advisory Scientific Committee 6, European Systemic Risk Board.
    14. Crifo, Patricia & Forget, Vanina D. & Teyssier, Sabrina, 2015. "The price of environmental, social and governance practice disclosure: An experiment with professional private equity investors," Journal of Corporate Finance, Elsevier, vol. 30(C), pages 168-194.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Altunbas, Yener & Gambacorta, Leonardo & Reghezza, Alessio & Velliscig, Giulio, 2022. "Does gender diversity in the workplace mitigate climate change?," Journal of Corporate Finance, Elsevier, vol. 77(C).
    2. Gambacorta, Leonardo & Pancotto, Livia & Reghezza, Alessio & Spaggiari, Martina, 2022. "Gender diversity in bank boardrooms and green lending: Evidence from euro area credit register data," CEPR Discussion Papers 17650, C.E.P.R. Discussion Papers.
    3. Antonio Forte & Selay Sahan & Damiano B. Silipo, 2024. "Do Natural Disasters Reduce Loans to the More CO 2 -Emitting Sectors?," Sustainability, MDPI, vol. 16(10), pages 1-24, May.
    4. Reghezza, Alessio & Altunbas, Yener & Marques-Ibanez, David & Rodriguez d’Acri, Costanza & Spaggiari, Martina, 2022. "Do banks fuel climate change?," Journal of Financial Stability, Elsevier, vol. 62(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cortez, Maria Céu & Andrade, Nuno & Silva, Florinda, 2022. "The environmental and financial performance of green energy investments: European evidence," Ecological Economics, Elsevier, vol. 197(C).
    2. Ralph De Haas & Alexander Popov, 2023. "Finance and Green Growth," The Economic Journal, Royal Economic Society, vol. 133(650), pages 637-668.
    3. Stefano Ramelli & Alexander F Wagner & Richard J Zeckhauser & Alexandre Ziegler, 2021. "Investor Rewards to Climate Responsibility: Stock-Price Responses to the Opposite Shocks of the 2016 and 2020 U.S. Elections [Asset pricing with liquidity risk]," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 10(4), pages 748-787.
    4. Trinks, Arjan & Mulder, Machiel & Scholtens, Bert, 2020. "An Efficiency Perspective on Carbon Emissions and Financial Performance," Ecological Economics, Elsevier, vol. 175(C).
    5. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    6. Martijn Boermans & Rients Galema, 2023. "Carbon home bias of European investors," Working Papers 786, DNB.
    7. Mueller, Isabella & Sfrappini, Eleonora, 2022. "Climate Change-Related Regulatory Risks and Bank Lending," Working Paper Series 2670, European Central Bank.
    8. Reghezza, Alessio & Altunbas, Yener & Marques-Ibanez, David & Rodriguez d’Acri, Costanza & Spaggiari, Martina, 2022. "Do banks fuel climate change?," Journal of Financial Stability, Elsevier, vol. 62(C).
    9. Huang, Qiping & Li, Yongjia & Lin, Meimei & McBrayer, Garrett A., 2022. "Natural disasters, risk salience, and corporate ESG disclosure," Journal of Corporate Finance, Elsevier, vol. 72(C).
    10. Billio, Monica & Costola, Michele & Hristova, Iva & Latino, Carmelo & Pelizzon, Loriana, 2022. "Sustainable finance: A journey toward ESG and climate risk," SAFE Working Paper Series 349, Leibniz Institute for Financial Research SAFE.
    11. Julia Anna Bingler & Chiara Colesanti Senni, 2020. "Taming the Green Swan: How to improve climate-related financial risk assessments," CER-ETH Economics working paper series 20/340, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    12. Miriam Breitenstein & Duc Khuong Nguyen & Thomas Walther, 2021. "Environmental Hazards And Risk Management In The Financial Sector: A Systematic Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 512-538, April.
    13. Bingler, Julia Anna & Kraus, Mathias & Leippold, Markus & Webersinke, Nicolas, 2022. "Cheap talk and cherry-picking: What ClimateBert has to say on corporate climate risk disclosures," Finance Research Letters, Elsevier, vol. 47(PB).
    14. De Haas, Ralph & Popov, Alexander, 2019. "Finance and carbon emissions," Working Paper Series 2318, European Central Bank.
    15. Zhichuan Frank Li & Saurin Patel & Srikanth Ramani, 2021. "The Role of Mutual Funds in Corporate Social Responsibility," Journal of Business Ethics, Springer, vol. 174(3), pages 715-737, December.
    16. Stefano Ramelli & Alexander F. Wagner & Richard J. Zeckhauser & Alexandre Ziegler, 2018. "Investor Rewards to Climate Responsibility: Evidence from the 2016 Climate Policy Shock," NBER Working Papers 25310, National Bureau of Economic Research, Inc.
    17. Egli, Florian & Schärer, David & Steffen, Bjarne, 2022. "Determinants of fossil fuel divestment in European pension funds," Ecological Economics, Elsevier, vol. 191(C).
    18. Caroline Flammer & Michael W. Toffel & Kala Viswanathan, 2021. "Shareholder activism and firms' voluntary disclosure of climate change risks," Strategic Management Journal, Wiley Blackwell, vol. 42(10), pages 1850-1879, October.
    19. Ferrell, Allen & Liang, Hao & Renneboog, Luc, 2016. "Socially responsible firms," Journal of Financial Economics, Elsevier, vol. 122(3), pages 585-606.
    20. Ferriani, Fabrizio, 2023. "Issuing bonds during the Covid-19 pandemic: Was there an ESG premium?," International Review of Financial Analysis, Elsevier, vol. 88(C).

    More about this item

    Keywords

    : Green banks; Greenhouse Gas Emissions; Climate Change.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:743. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael brassart (email available below). General contact details of provider: https://edirc.repec.org/data/bdfgvfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.