Work

Being stranded with fossil fuel reserves? Climate policy risk and the pricing of bank loans

Year: 2024

Type: article

Abstract: Do banks price the risk of stranded fossil fuel reserves? To address this question, we hand collect global data on corporate fossil fuel reserves from 2002 to 2016, match it with syndicated loans, and subsequently compare the loan rate charged to fossil fuel firms — along their climate policy exposure — to other firms. We find that banks price climate policy exposure, especially after 2015. We also uncover that our main effect further increases for loans with longer maturity, that loan size to fossil fuel firms increases, and that ‛Green’ banks also charge higher loan rates to fossil fuel firms.

Source: Financial Markets Institutions and Instruments

DOI: 10.1111/fmii.12189

Authors: Manthos D. Delis, Kathrin de Greiff, Maria Iosifidi, Steven Ongena

Institutions: Audencia Business School, Swiss Finance Institute, MBS School of Business, University of Zurich, KU Leuven

Language: English

Topic: Sustainable Finance and Green Bonds

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Climate action, Affordable and clean energy

Open Access status: hybrid

Estimated APC paid: $2,760