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Do banks fuel climate change?

Author

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  • Reghezza, Alessio
  • Altunbas, Yener
  • Marqués-Ibáñez, David
  • Rodriguez d’Acri, Costanza
  • Spaggiari, Martina

Abstract

Do climate-oriented regulatory policies affect the flow of credit towards polluting corporations? We match loan-level data to firm-level greenhouse gas emissions to assess the impact of the Paris Agreement. We find that, following this agreement, European banks reallocated credit away from polluting firms. In the aftermath of President Trump’s 2017 announcement that the United States was withdrawing from the Paris Agreement, lending by European banks to polluting firms in the United States decreased even further in relative terms. It follows that green regulatory initiatives in banking can have a significant impact combating climate change. JEL Classification: E51, G28, H23

Suggested Citation

  • Reghezza, Alessio & Altunbas, Yener & Marqués-Ibáñez, David & Rodriguez d’Acri, Costanza & Spaggiari, Martina, 2021. "Do banks fuel climate change?," Working Paper Series 2550, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20212550
    Note: 328790
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    References listed on IDEAS

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    More about this item

    Keywords

    climate change; difference-in-differences; loan-level data; Paris Agreement; Trump;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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