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Impacts of ESG banking regulation on financing new sustainable technologies

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  • Schreiner, Lena
  • Beyer, Andreas

Abstract

How does environmental, social and governance regulation of banks affect capital provision to the sustainability transition? As ambitious sustainability targets face funding challenges, the financial sector is tasked with channeling more private capital into sustainable investments. However, scaling sustainable technologies often requires investment in non-ESG-compliant assets. The mobility transition to electric vehicles, for example, demands increased supply of battery raw materials like Lithium, Cobalt, Manganese, and Nickel. This paper analyzes how ESG regulation impacts capital provision to mining companies supplying these materials. Concretely, we assess effects of the European Union’s Sustainable Finance Disclosure Regulation and of the Taxonomy on banks’ public holdings and cost of capital, using two large, novel data sets. We find that the introduction of the ESG regulations has a dampening effect on banks’ holdings in battery raw material mining companies, in particular those with poor ESG performance. The companies’ cost of capital and lending behavior remain unchanged. JEL Classification: G21, G28, Q50

Suggested Citation

  • Schreiner, Lena & Beyer, Andreas, 2025. "Impacts of ESG banking regulation on financing new sustainable technologies," Working Paper Series 3089, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20253089
    Note: 336354
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    References listed on IDEAS

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    JEL classification:

    • 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
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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