Carbon Transition Risk and Corporate Loan Securitization
Isabella Müller, Huyen Nguyen, Trang Nguyen
Abstract
We examine how banks manage carbon transition risk by selling loans given to polluting borrowers to less regulated shadow banks in securitization markets. Exploiting the election of Donald Trump as an exogenous shock that reduces carbon risk, we find that banks’ securitization decisions are sensitive to borrowers’ carbon footprints. Banks are more likely to securitize brown loans when carbon risk is high but swiftly change to keep these loans on their balance sheets when carbon risk is reduced after Trump’s election. Importantly, securitization enables banks to offer lower interest rates to polluting borrowers but does not affect the supply of green loans. Our findings are more pronounced among domestic banks and banks that do not display green lending preferences. We discuss how securitization can weaken the effectiveness of bank climate policies through reducing banks’ incentives to price carbon risk.
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Climate Change-Related Regulatory Risks and Bank Lending
Isabella Müller, Eleonora Sfrappini
ECB Working Paper,
No. 2670,
2022
Abstract
We identify the effect of climate change-related regulatory risks on credit real-location. Our evidence suggests that effects depend borrower's region. Following an increase in salience of regulatory risks, banks reallocate credit to US firms that could be negatively impacted by regulatory interventions. Conversely, in Europe, banks lend more to firms that could benefit from environmental regulation. The effect is moderated by banks' own loan portfolio composition. Banks with a portfolio tilted towards firms that could be negatively a affected by environmental policies increasingly support these firms. Overall, our results indicate that financial implications of regulation associated with climate change appear to be the main drivers of banks' behavior.
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Asymmetric Investment Responses to Firm-specific Forecast Errors
Julian Berner, Manuel Buchholz, Lena Tonzer
Abstract
This paper analyses how firm-specific forecast errors derived from survey data of German manufacturing firms over 2007–2011 affect firms’ investment propensity. Understanding how forecast errors affect firm investment behaviour is key to mitigate economic downturns during and after crisis periods in which forecast errors tend to increase. Our findings reveal a negative impact of absolute forecast errors on investment. Strikingly, asymmetries arise depending on the size and direction of the forecast error. The investment propensity declines if the realised situation is worse than expected. However, firms do not adjust investment if the realised situation is better than expected suggesting that the uncertainty component of the forecast error counteracts positive effects of unexpectedly favorable business conditions. Given that the fraction of firms making positive forecast errors is higher after the peak of the recent financial crisis, this mechanism can be one explanation behind staggered economic growth and slow recovery following crises.
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Climate Change and Corporate Innovation Processes
Wilfried Ehrenfeld
IWH Discussion Papers,
No. 13,
2012
Abstract
Das vorliegende Diskussionspapier stellt den inhaltlichen Rahmen der kumulativen Dissertation zum Thema „Climate Change and Corporate Innovation Processes“ an der Technischen Universität Dresden dar. Diese besteht aus sechs bereits veröffentlichten Fachartikeln. Durch die gegenwärtig öffentlich geführte Diskussion zum Thema Klimawandel stehen europäische Industrieunternehmen neuen Anforderungen gegenüber. Dazu zählen vor allem neue Ansprüche, die ihr betriebliches Umfeld an sie stellt. Eine Möglichkeit, auf diese neuen Ansprüche zu reagieren, ist Anpassung durch Innovation. Das übergeordnete Ziel der Dissertation ist es deshalb zu untersuchen, wie die Wahrnehmung des Klimawandels seitens der Anspruchsgruppen (Stakeholder) betriebliche Innovations-prozesse beeinflusst. In dem Zusammenhang werden diese Fragestellungen sowohl theoretisch als auch empirisch untersucht. Die Dissertation leistet so einen Beitrag zu verschiedenen Literaturströmungen auf dem Themengebiet „unternehmerische Anpassungsstrategien an den Klimawandel“.
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