Environmental and Climate Factors of Corporate Lending in Russia

This paper analyses how Russian banks incorporate environmental and climate factors into corporate loan pricing. Our findings suggest that, in the absence of any regulation of "green" finance in Russia, banks do not take into account the impact of borrowers on the environment when setting interest rates. While Russian banks impose markups on interest rates for loans to more polluting firms, those markups are economically insignificant. The largest markups are observed among large private domestic banks, while state-owned banks impose the lowest. Specifically, the interest rate on loans from large private domestic banks to highly-polluting firms is only 0.04–0.07 percentage points higher than that for ’green’ firms. These minimal differences in loan pricing indicate that under the current regulations, Russian banks do not significantly differentiate lending terms between ’green’ companies and others. We examine the heterogeneity of the price setting across different bank groups — state- owned, foreign-owned, or privately-held banks — considering the intensity of CO2 emissions at the industry and firm level, as well as firms’ export status. For the analysis, we exploit unique monthly loan-level data provided by the Central Bank of Russia’s credit register, covering the period from 2017 to 2022, along with firm-level data on environmental fees for pollution of air, water and waste disposal.