Do Banks Fuel Climate Change?

40 Pages Posted: 19 May 2021

See all articles by Alessio Reghezza

Alessio Reghezza

Bangor Business School

Yener Altunbas

University of Wales, Bangor

David Marques-Ibanez

European Central Bank (ECB)

Costanza Rodriguez d’Acri

European Central Bank (ECB)

Martina Spaggiari

European Central Bank

Date Written: May 1, 2021

Abstract

Do climate-oriented regulatory policies affect the flow of credit towards polluting corporations? We match loan-level data to firm-level greenhouse gas emissions to assess the impact of the Paris Agreement. We find that, following this agreement, European banks reallocated credit away from polluting firms. In the aftermath of President Trump’s 2017 announcement that the United States was withdrawing from the Paris Agreement, lending by European banks to polluting firms in the United States decreased even further in relative terms. It follows that green regulatory initiatives in banking can have a significant impact combating climate change.

JEL Classification: E51, G28, H23

Suggested Citation

Reghezza, Alessio and Altunbas, Yener and Marques-Ibanez, David and d’Acri, Costanza Rodriguez and Spaggiari, Martina, Do Banks Fuel Climate Change? (May 1, 2021). ECB Working Paper No. 2021/2550, Available at SSRN: https://ssrn.com/abstract=3846654 or http://dx.doi.org/10.2139/ssrn.3846654

Alessio Reghezza (Contact Author)

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

Yener Altunbas

University of Wales, Bangor ( email )

Bangor, Wales LL57 2DG
United Kingdom

David Marques-Ibanez

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
49 6913 44 6460 (Phone)
49 6913 44 6460 (Fax)

Costanza Rodriguez D’Acri

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Martina Spaggiari

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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