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Renewable energy and bank credit risk: The mediating role of economic growth

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  • Plikas, John Hlias
  • Kenourgios, Dimitrios

Abstract

We investigate the relationship between renewable energy sources and bank credit risk. While prior research highlights the economic and environmental benefits of renewable energy, little is known about its impact on credit risk across energy types, market shares and country conditions. Utilizing data from 28 European economies over 2013 to 2022, we employ OLS to empirically examine both the direct effects of renewable energy on credit risk and the indirect effects through economic growth. Our results reveal that renewables stimulate economic growth, strengthening borrowers’ capacity and lowering credit risk, highlighting economic growth as a mediator. Renewable energy acts as a buffer against climate-related shocks. Electricity and heat-based renewables, particularly solar, are most effective. Stronger effects occur in core European economies, while peripheral ones benefit more from institutional quality and environmental, social and governance integration. These findings highlight the role of renewable energy in linking sustainability with long-term financial resilience.

Suggested Citation

  • Plikas, John Hlias & Kenourgios, Dimitrios, 2026. "Renewable energy and bank credit risk: The mediating role of economic growth," Economic Modelling, Elsevier, vol. 160(C).
    • Handle: RePEc:eee:ecmode:v:160:y:2026:i:c:s0264999326001057
    DOI: 10.1016/j.econmod.2026.107576
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    Keywords

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    JEL classification:

    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O44 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Environment and Growth

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