How Does Climate Change Affect Bank Credit? A Country Level Analysis

20 Pages Posted: 13 Nov 2023

See all articles by Massimiliano Caporin

Massimiliano Caporin

University of Padua - Department of Statistical Sciences

Arusha V. Cooray

Embassy of Sri Lanka, Oslo

Bekhzod Kuziboev

affiliation not provided to SSRN

Abstract

Banks have increasingly begun to realise the importance of incorporating climate change into their operations and policies. This paper investigates the effect of climate change on bank lending in 156 nations over 1996-2019. Estimating linear and non-linear models for three groups of countries: developed, developing and transition, we find an inverted U-shaped relation between CO2 emissions and bank credit for the developed nations, and U-shaped relation for the developing and transition nations. We similarly observe a U-shaped relation between biocapacity and domestic credit for the developed nations, and an inverted U-shaped relation for the developing and transition nations. Estimates and marginal effects suggest that developed nations incorporate climate change into their credit policies, while the developing and transition nations fail to do so. There is greater pressure on the environment with development and greater credit disbursement in the developing and transition economies.

Keywords: bank credit, climate change, CO2 emissions, biocapacity

Suggested Citation

Caporin, Massimiliano and Cooray, Arusha V. and Kuziboev, Bekhzod, How Does Climate Change Affect Bank Credit? A Country Level Analysis. Available at SSRN: https://ssrn.com/abstract=4631385 or http://dx.doi.org/10.2139/ssrn.4631385

Massimiliano Caporin (Contact Author)

University of Padua - Department of Statistical Sciences ( email )

Via Battisti, 241
Padova, 35121
Italy

Arusha V. Cooray

Embassy of Sri Lanka, Oslo ( email )

Norway

Bekhzod Kuziboev

affiliation not provided to SSRN ( email )

No Address Available

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