This study investigates the underlying reasons for banks’ continued support of fossil fuel-based firms and examines the role of public guaranteed loans (PGLs) in redirecting resources towards greener eco- nomic activities, thereby facilitating the climate transition process. Using a unique pan-European credit register dataset, we combine supervisory bank data with firm-level greenhouse gas emission data and fi- nancial information. Our analysis yields three main findings. Firstly, European banks perceive lending to green companies as riskier compared to their brown counterparts, a phenomenon we term as the “green- transition risk.” Secondly, we provide evidence that during the COVID-19 pandemic, European banks have strategically leveraged PGLs to channel resources towards environmentally sustainable activities, thereby augmenting the proportion of green loans in their portfolios and partially shifting the inherent “green-transition risk” to European governments and citizens. Lastly, our investigation reveals a banking preference for awarding PGLs to financially robust green firms over less profitable, highly indebted green firms, which could pose significant challenges for green businesses requiring financial support during the COVID-19 crisis.
Greening the economy: how public-guaranteed loans influence firm-level resource allocation
Bruno Buchetti;Salvatore Perdichizzi;
2024
Abstract
This study investigates the underlying reasons for banks’ continued support of fossil fuel-based firms and examines the role of public guaranteed loans (PGLs) in redirecting resources towards greener eco- nomic activities, thereby facilitating the climate transition process. Using a unique pan-European credit register dataset, we combine supervisory bank data with firm-level greenhouse gas emission data and fi- nancial information. Our analysis yields three main findings. Firstly, European banks perceive lending to green companies as riskier compared to their brown counterparts, a phenomenon we term as the “green- transition risk.” Secondly, we provide evidence that during the COVID-19 pandemic, European banks have strategically leveraged PGLs to channel resources towards environmentally sustainable activities, thereby augmenting the proportion of green loans in their portfolios and partially shifting the inherent “green-transition risk” to European governments and citizens. Lastly, our investigation reveals a banking preference for awarding PGLs to financially robust green firms over less profitable, highly indebted green firms, which could pose significant challenges for green businesses requiring financial support during the COVID-19 crisis.Pubblicazioni consigliate
I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.