Carbon neutrality, bank lending, and credit risk: Evidence from the Eurozone.
Carbon emissions
Credit risk
Environment management
Green financing
Journal
Journal of environmental management
ISSN: 1095-8630
Titre abrégé: J Environ Manage
Pays: England
ID NLM: 0401664
Informations de publication
Date de publication:
15 Oct 2021
15 Oct 2021
Historique:
received:
22
03
2021
revised:
18
06
2021
accepted:
22
06
2021
pubmed:
6
7
2021
medline:
18
8
2021
entrez:
5
7
2021
Statut:
ppublish
Résumé
The development of a green financial intermediation channel is imperative to achieve zero-carbon economies. In this study, we assess the impact of carbon-neutral lending on the credit risk in the Eurozone. We employ quarterly data for a sample of 344 lending institutions of 19 member states spanning over ten years from 2011 to 2020. Using two specific credit risk measures, the findings show that the exposure to carbon-neutral lending is negatively related to the default risk. The results remain consistent for the various size sorts, depicting that regardless of the bank size, the impact of green financing on the credit risk is the same. We attribute the credit risk reduction to the lower volatility of the borrowers' earnings and cash flows emanating from their sustainable business model. As a consequence of lower credit risk, financial institutions can benefit from lower loan loss provisions and economic capital requirements. This incentive is vital to increase the carbon neutral credit and contribute towards pro-environmental goals.
Identifiants
pubmed: 34225048
pii: S0301-4797(21)01218-4
doi: 10.1016/j.jenvman.2021.113156
pii:
doi:
Substances chimiques
Carbon
7440-44-0
Types de publication
Journal Article
Langues
eng
Sous-ensembles de citation
IM
Pagination
113156Informations de copyright
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