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

70 Pages Posted: 2 May 2023 Last revised: 3 May 2024

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: May 3, 2024

Abstract

Using confidential information on banks’ portfolios, inaccessible to market participants, we show that banks that emphasize the sustainability of their lending policies in their disclosures extend a higher volume of credit to brown borrowers, without charging higher interest rates or shortening debt maturity. These results cannot be attributed to the financing of borrowers’ transition towards greener technologies. Examining the mechanisms behind the strategic disclosure choices, we highlight that banks extend credit to existing brown borrowers, especially if they are financially underperforming.

Keywords: financial institutions, sustainability reporting, strategic disclosure, zombie lending, ChatGPT

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 (May 3, 2024). 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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