Download This PaperBeing Stranded with Fossil Fuel Reserves? Climate Policy Risk and the Pricing of Bank Loans
61 Pages Posted: 17 Feb 2018 Last revised: 15 Jul 2021
There are 3 versions of this paper
Being Stranded with Fossil Fuel Reserves? Climate Policy Risk and the Pricing of Bank Loans
Being Stranded with Fossil Fuel Reserves? Climate Policy Risk and the Pricing of Bank loans
Being Stranded on the Carbon Bubble? Climate Policy Risk and the Pricing of Bank Loans
Date Written: April 21, 2019
Abstract
Do banks price the risk of stranded fossil fuel reserves? To address this question, we hand collect global data on corporate fossil fuel reserves, match it with syndicated loans, and subsequently compare the loan rate charged to fossil fuel firms — along their climate policy exposure — to other firms. We find that banks price climate policy exposure, especially after 2015. We also uncover that our main effect further increases for loans with longer maturity, that loan size to fossil fuel firms increases, and that “Green” banks also charge higher loan rates to fossil fuel firms.
Keywords: Environmental policy; Climate policy risk; Loan pricing; Loan maturity; Fossil fuel firms; Stranded assets
JEL Classification: G2, Q3, Q5
Suggested Citation: Suggested Citation
Kathrin de Greiff
Swiss Finance Institute ( email )
c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland
Swiss Finance Institute
c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland