Being 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

See all articles by Manthos D. Delis

Manthos D. Delis

Audencia Business School

Kathrin de Greiff

University Zurich; Swiss Finance Institute

Maria Iosifidi

Montpellier Business School

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

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

Delis, Manthos D. and de Greiff, Kathrin and de Greiff, Kathrin and Iosifidi, Maria and Ongena, Steven R. G., Being Stranded with Fossil Fuel Reserves? Climate Policy Risk and the Pricing of Bank Loans (April 21, 2019). Swiss Finance Institute Research Paper No. 18-10, Available at SSRN: https://ssrn.com/abstract=3125017 or http://dx.doi.org/10.2139/ssrn.3125017

Manthos D. Delis

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

Kathrin de Greiff

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

University Zurich ( email )

Schönberggasse 1
Zurich
Switzerland

Maria Iosifidi

Montpellier Business School ( email )

Steven R. G. Ongena (Contact Author)

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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