'Glossy Green' Banks: The Disconnect Between Environmental Disclosures and Lending Activities

89 Pages Posted: 2 May 2023 Last revised: 6 Sep 2023

See all articles by Mariassunta Giannetti

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Martina Jasova

Columbia University, Barnard College - Department of Economics

Maria Loumioti

The University of Texas at Dallas

Caterina Mendicino

European Central Bank (ECB) - Directorate General Research

Date Written: August 27, 2023

Abstract

Using a credit registry of European banks’ new loan issuance and content analysis on their environmental disclosures, we show that banks that discuss the environment more extensively extend a higher volume of credit to borrowers in brown industries. These results are robust even after controlling for banks’ climate risk discussions and cannot be attributed to the financing of borrowers’ transition towards greener technologies. Examining the mechanisms behind the strategic disclosure choices, we highlight that banks are hesitant to sever ties with existing brown borrowers, particularly when those borrowers exhibit financial underperformance or banks have low capital adequacy.

Keywords: financial institutions, greenwashing, sustainability reporting, credit exposure, zombie lending

JEL Classification: G11, G15, G21

Suggested Citation

Giannetti, Mariassunta and Jasova, Martina and Loumioti, Maria and Mendicino, Caterina, 'Glossy Green' Banks: The Disconnect Between Environmental Disclosures and Lending Activities (August 27, 2023). Swedish House of Finance Research Paper No. 23-07, European Corporate Governance Institute – Finance Working Paper No. 919/2023, Available at SSRN: https://ssrn.com/abstract=4424081 or http://dx.doi.org/10.2139/ssrn.4424081

Mariassunta Giannetti

Stockholm School of Economics ( email )

P.O. Box 6501
Sveavagen 65
SE-113 83 Stockholm
Sweden
+46 8 736 9607 (Phone)
+46 8 312 327 (Fax)

HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

Martina Jasova (Contact Author)

Columbia University, Barnard College - Department of Economics ( email )

3009 Broadway
New York, NY 10027
United States

Maria Loumioti

The University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

Caterina Mendicino

European Central Bank (ECB) - Directorate General Research ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
Germany

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