Working Paper: CEPR ID: DP18572
Authors: Ralph de Haas
Abstract: This paper reviews the literature on banks, climate change, and the global shift towards a low-carbon economy. It first examines the contribution of banks to climate change mitigation, with an emphasis on banks’ roles in financing green innovation and the diffusion of low-carbon technologies. The paper then reviews whether banks have begun to recalibrate their credit supply in response to the transition and physical risks of global warming. Here, the focus is on empirical work analysing how sea level rise and the increased frequency and intensity of hurricanes, floods, droughts, and wildfires are impacting banks’ balance sheets and operations. Last, the paper discusses several related topics: credit access and climate change adaptation; carbon arbitrage and greenwashing; and green financial regulation and credit guidelines. The paper concludes by sketching a few promising avenues for future research on sustainable banking.
Keywords: sustainable banking; climate finance; climate change; global warming
JEL Codes: F30; F64; G21; O44; Q01; Q32; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| banks' financing decisions (G21) | development and diffusion of green technologies (Q55) |
| banks' existing loan portfolios (G21) | willingness to lend to carbon-intensive industries (G21) |
| willingness to lend to carbon-intensive industries (G21) | funding for new green technologies (Q55) |
| access to bank credit (G21) | diffusion of green technologies (Q55) |
| physical risks from climate change (Q54) | banks' lending practices (G21) |
| transition risks (P27) | cost of borrowing (G21) |