Credit supply and green investments
50 Pages Posted: 3 May 2022
Date Written: April 26, 2022
What is the role that credit supply plays in the climate transition process? We answer this question by looking at the effect of bank loans on green investments. We use textual algorithms to extract information on green investments from the comments to the financial statements of Italian firms between 2015 and 2019, and match this information with loan-level data from the Italian Credit Registry. Using an exogenous firm-specific time-varying measure of bank credit supply, we find that credit provision significantly increases firms’ likelihood to undertake green investments. This effect is more pronounced for firms operating in regions providing green subsidies, and with high environmental consciousness.
Keywords: Climate finance, financial intermediation, credit supply
JEL Classification: G32, Q54, Q55
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