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Climate transition risk and bank lending

Author

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  • Brunella Bruno
  • Sara Lombini

Abstract

We investigate whether and how banks in the global syndicated loan market adjusted the pricing and supply of credit to account for higher climate transition risk (CTR) in the years following the 2015 Paris Agreement. We measure CTR by considering the pollution levels of borrowers and the engagement of countries where borrowers are headquartered in addressing climate change issues. The evidence is mixed and points to nonlinear relations between lending variables and CO2 emissions. Policy events such as the Paris Agreement and government environmental awareness are significant climate risk drivers that, when combined, may amplify banks' perception of CTR.

Suggested Citation

  • Brunella Bruno & Sara Lombini, 2023. "Climate transition risk and bank lending," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 46(S1), pages 59-106, December.
    • Handle: RePEc:bla:jfnres:v:46:y:2023:i:s1:p:s59-s106
    DOI: 10.1111/jfir.12360
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    References listed on IDEAS

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    Cited by:

    1. Elisa Di Febo, 2025. "Transition Risk in Climate Change: A Literature Review," Risks, MDPI, vol. 13(4), pages 1-25, March.
    2. Becker, Annette & Di Girolamo, Francesca Erica & Rho, Caterina, 2025. "Loan pricing and biodiversity exposure: Nature-related spillovers to the financial sector," Research in International Business and Finance, Elsevier, vol. 75(C).
    3. Philip Fliegel, 2025. "How (Not) to Measure Companies' Climate Transition Risk: A Framework and Categorized Literature Review," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(3), pages 3049-3077, May.
    4. Yun Zhang & Hui Ming, 2025. "Climate risk exposure and bank risk-taking behavior: new evidence from China," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-19, December.
    5. Chalabi-Jabado, Fatima & Ziane, Ydriss, 2024. "Climate risks, financial performance and lending growth: Evidence from the banking industry," Technological Forecasting and Social Change, Elsevier, vol. 209(C).
    6. Muhammad Umar & Farzan Yahya & Amad Rashid, 2025. "Climate risk and loan pricing: the moderating role of trilemma policy choices," Economic Change and Restructuring, Springer, vol. 58(4), pages 1-40, August.
    7. Zhang, Lei & Chen, Jie & Jiang, Chunqiao, 2026. "Climate risk and banks’ risk-taking behavior," Finance Research Letters, Elsevier, vol. 87(C).
    8. Rega, Federico Giovanni & Russo, Simona & Salerno, Dario, 2025. "Disentangling the S and the G in the European banking industry: The role of climate risk and opportunity awareness," Research in International Business and Finance, Elsevier, vol. 77(PB).
    9. Lorenzo Fichera & Simona Galletta & Sebastiano Mazzù, 2025. "Climate Transition Challenges: Exploring Credit Portfolio Misalignment in European Banks," Business Strategy and the Environment, Wiley Blackwell, vol. 34(8), pages 10118-10130, December.

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