Working Paper

Industrial Composition of Syndicated Loans and Banks’ Climate Commitments

Abstract: In the past two decades, a number of banks joined global initiatives aimed to mitigate climate change by “greening” their asset portfolios. We study whether banks that made such commitments have a different emission exposure of their portfolios of syndicated loans than banks that did not. We rely on loan-level information with global coverage combined with country-industry information on emissions. We find that all banks have reduced their loan-emission exposures over the last 8 years. However, we do not find differences between banks that did and those that did not signal their sustainability goals, with the exception of early signers of Principles of Responsible Investments (PRI), who already had lower exposure to emissions through their syndicated lending. In addition, banks that signed PRI shortened the maturity of the loans extended to highly-emitting industries but only temporarily. Thus, we conclude that banks reduced their exposure to climate transition risks on average, but voluntary climate commitments did not contribute to syndicated loan reallocation away from highly-emitting sectors.

Keywords: climate; sustainable finance; green finance; bank lending; syndicated loans;

JEL Classification: G21; F21; Q54;

https://doi.org/10.24148/wp2024-23

Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: Working Paper Series

Publication Date: 2024-07-30

Number: 2024-23