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Working Paper
Banking on Deforestation: The Cost of Nonenforcement
Despite surging environmental laws, how their enforcement influences banks’ management of climate risks remains underexplored. Using the Brazilian Amazon as a laboratory, we examine the impact of a shock to environmental law enforcement capacity on bank management of risks arising from deforestation — a significant but understudied climate risk. After enforcement declined, Brazilian banks significantly altered their priorities to more short-term profitability over longer-term risk concerns. Banks greatly increased lending to agribusinesses engaged in deforestation and actively shifted ...
Dallas Fed, Latin American central banks explore financial stability risks
The COVID-19 pandemic, recent monetary tightening and a strengthening U.S. dollar were the themes explored during a recent conference organized by the Federal Reserve Bank of Dallas and the Center for Latin American Monetary Studies (CEMLA) and held at CEMLA’s Mexico City headquarters.