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Bank Carbon Risk Index – A simple indicator of climate-related transition risks of lending activity

Author

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  • Laszlo Bokor

    (Magyar Nemzeti Bank (Central Bank of Hungary))

Abstract

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 trends of this indicator alerts to significantly regrowing risks.

Suggested Citation

  • Laszlo Bokor, 2021. "Bank Carbon Risk Index – A simple indicator of climate-related transition risks of lending activity," MNB Occasional Papers 2021/141, Magyar Nemzeti Bank (Central Bank of Hungary).
    • Handle: RePEc:mnb:opaper:2021/141
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    File URL: https://www.mnb.hu/letoltes/mnb-op-141-final.pdf
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    More about this item

    Keywords

    climate change; transition risk; greenhouse gas intensity; lending activity; risk indicator;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • 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

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