“Glossy Green” Banks: The Disconnect Between European Banks’ Sustainability Reporting and Lending Activities
Mariassunta Giannetti1, Martina Jasova2, Maria Loumioti3, Caterina Mendicino4
1Stockholm School of Economics; 2Barnard College, Columbia University; 3The University of Texas at Dallas; 4European Central Bank
Discussant: Jose-Luis Peydro (Imperial College London)
We study the relation between banks’ environmental reporting and lending activities. We create a proxy for environmental-themed disclosures using content analysis on banks’ investor reports. Taking advantage of granular loan-level data from a euro-area credit registry, we show that banks with extensive environmental disclosures lend more to brown borrowers and do not provide more credit to firms in green industries. We find that these results are not driven by banks’ financing of brown borrowers’ transition to greener technologies. Instead, these banks lend to the weakest borrowers in brown industries, especially if they have low capital adequacy. Our results suggest that European banks overemphasize their climate goals and credentials, but continue to be tied to their established credit relationships with polluting borrowers.
ID: 534
Credit supply and green investments
Emilia Garcia-Appendini1, Antonio Accetturo2, Michele Cascarano2, Giorgia Barboni3, Marco Tomasi4
1Norges Bank, Norway; 2Bank of Italy; 3Warwick Business School; 4University of Trento
Discussant: Francesca Zucchi (European Central Bank)
Does an increase in credit supply affect firms' likelihood to invest in green technologies? To answer this question, we use text algorithms to extract information on green investments from the comments to the financial statements of Italian SMEs between 2015 and 2019. To identify the effect of credit supply, we use all loans disbursed by banks operating in Italy to construct a firm-specific time-varying instrument for credit availability. We find a large positive elasticity of green investments to credit supply. The effect is concentrated among firms with high availability of internal capital and in areas with higher preferences for environmental protection. Subsidies and market competition can spur green investments if combined with environmental awareness.
ID: 582
Value-Driven Bankers and the Granting of Credit to Green Firms
Di Bu2, Matti Keloharju3,4,5, Yin Liao2, Steven Ongena1,6,7,8,4
1University of Zurich, Switzerland; 2Macquarie University, Australia; 3Aalto University School of Business, Finland; 4CEPR, UK; 5IFN, Finland; 6Swiss Finance Institute, Switzerland; 7KU Leuven, Belgium; 8NTNU Business School, Norway
Discussant: Ana Isabel Sá (University of Porto)
How do bankers treat green firms? Utilizing unique loan application and banker preference data from a mid-sized bank, we find that customer managers, serving as front-line bankers, provide more favorable recommendations for green firms, particularly when they hold strong green values. However, a minority of environmentally skeptical bankers counteract this trend. These brown managers fake green interests when their recommendations bear no weight, and conversely, diminish their endorsements to green firms when they do hold significance. Additionally, brown loan officers, acting as superiors to these managers, strive to offset positive green firm evaluations by downgrading them.
