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Does climate change affect bank lending behavior?

  • Caglayan Aslan
  • , Erdem Bulut
  • , Oguzhan Cepni
  • , Muhammed Hasan Yilmaz*
  • *Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We examine how banks adjust credit supply in areas with higher exposure to climate risks by utilizing the province-level air pollution and loan growth data of a large emerging market, Turkey, following the Paris Agreement in 2015. Our results show that banks limit their credit extension to more polluted provinces in the post-agreement interval, implying that banks consider climate change-related risks and adjust their credit provisioning accordingly. Our baseline findings are intact against a myriad of robustness checks. We also find that the shift in the climate risk-credit provisioning nexus is asymmetric depending on the levels of air pollution.
Original languageEnglish
Article number110859
Number of pages5
JournalEconomics Letters
Volume220
Early online date29 Sept 2022
DOIs
Publication statusPublished - 1 Nov 2022

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

  1. SDG 13 - Climate Action
    SDG 13 Climate Action

Keywords

  • Air pollution
  • Climate change
  • Paris Agreement
  • Bank loans
  • Financial stability

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