Banks' Climate Commitments and Credit to Brown Industries: New Evidence for France

36 Pages Posted: 12 Dec 2019

Date Written: November 2019

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.

Keywords: green banks, greenhouse gas emissions, climate change

JEL Classification: G21, Q54

Suggested Citation

Mésonnier, Jean-Stéphane, Banks' Climate Commitments and Credit to Brown Industries: New Evidence for France (November 2019). Banque de France Working Paper No. 743, November 2019. Available at SSRN: https://ssrn.com/abstract=3502681 or http://dx.doi.org/10.2139/ssrn.3502681

Jean-Stéphane Mésonnier (Contact Author)

Banque de France -DGEI-DEMFI-RECFIN ( email )

Paris
France
+33 (0)1 42 92 91 63 (Phone)

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