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The carbon footprint of Italian loans

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  • Ivan Faiella

    (Bank of Italy)

  • Luciano Lavecchia

    (Bank of Italy)

Abstract

This article presents a first insight on the carbon content of business loans in Italy, using three different methods to identify the sectors more exposed to transition risks. According to our estimates, the loans’ carbon footprint of Italian banks is small compared to other European peers and the outstanding loans exposed to transition risk can be estimated in a range between 37 and 53 percent of total loans as of 2018 data, according to the methodology used. This information can be used as a starting point to evaluate, within a climate-scenario framework, how different climate policies influence the stability of the banking sector

Suggested Citation

  • Ivan Faiella & Luciano Lavecchia, 2020. "The carbon footprint of Italian loans," Questioni di Economia e Finanza (Occasional Papers) 557, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_557_20
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    References listed on IDEAS

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    2. Ivan Faiella & Federico Cingano, 2015. "La tassazione verde in Italia: l?analisi di una carbon tax sui trasporti," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2015(2), pages 45-90.
    3. Ivan Faiella & Alessandro Mistretta, 2015. "Spesa energetica e competitività delle imprese italiane," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2015(3), pages 85-121.
    4. Cahen-Fourot, Louison & Campiglio, Emanuele & Godin, Antoine & Kemp-Benedict, Eric & Trsek, Stefan, 2021. "Capital stranding cascades: The impact of decarbonisation on productive asset utilisation," Energy Economics, Elsevier, vol. 103(C).
    5. Christophe McGlade & Paul Ekins, 2015. "The geographical distribution of fossil fuels unused when limiting global warming to 2 °C," Nature, Nature, vol. 517(7533), pages 187-190, January.
    6. Emanuele Campiglio & Yannis Dafermos & Pierre Monnin & Josh Ryan-Collins & Guido Schotten & Misa Tanaka, 2018. "Climate change challenges for central banks and financial regulators," Nature Climate Change, Nature, vol. 8(6), pages 462-468, June.
    7. Stefano Battiston & Antoine Mandel & Irene Monasterolo & Franziska Schütze & Gabriele Visentin, 2017. "A climate stress-test of the financial system," Nature Climate Change, Nature, vol. 7(4), pages 283-288, April.
    8. Ivan Faiella & Alessandro Mistretta, 2022. "The Net Zero Challenge for Firms’ Competitiveness," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 83(1), pages 85-113, September.
    9. Ivan Faiella & Filippo Natoli, 2018. "Natural catastrophes and bank lending: the case of flood risk in Italy," Questioni di Economia e Finanza (Occasional Papers) 457, Bank of Italy, Economic Research and International Relations Area.
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    Cited by:

    1. Nguyen, Quyen & Diaz-Rainey, Ivan & Kuruppuarachchi, Duminda & McCarten, Matthew & Tan, Eric K.M., 2023. "Climate transition risk in U.S. loan portfolios: Are all banks the same?," International Review of Financial Analysis, Elsevier, vol. 85(C).
    2. Gambacorta, Leonardo & Pancotto, Livia & Reghezza, Alessio & Spaggiari, Martina, 2022. "Gender diversity in bank boardrooms and green lending: Evidence from euro area credit register data," CEPR Discussion Papers 17650, C.E.P.R. Discussion Papers.
    3. Louis Daumas, 2021. "Should we fear transition risks - A review of the applied literature," Working Papers 2021.05, FAERE - French Association of Environmental and Resource Economists.
    4. Salvatore Cardillo & Raffaele Gallo & Francesco Guarino, 2021. "Main challenges and prospects for the European banking sector: a critical review of the ongoing debate," Questioni di Economia e Finanza (Occasional Papers) 634, Bank of Italy, Economic Research and International Relations Area.
    5. Mercy Berman DeMenno, 2023. "Environmental sustainability and financial stability: can macroprudential stress testing measure and mitigate climate-related systemic financial risk?," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(4), pages 445-473, December.
    6. Enrico Bernardini & Ivan Faiella & Luciano Lavecchia & Alessandro Mistretta & Filippo Natoli, 2021. "Central banks, climate risks and sustainable finance," Questioni di Economia e Finanza (Occasional Papers) 608, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    climate change; financial stability; climate stress test; transition risk;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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