Physical Climate Change and the Sovereign Risk of Emerging Economies
Hannes Böhm
Journal of Economic Structures,
2022
Abstract
I show that rising temperatures can detrimentally affect the sovereign creditworthiness of emerging economies. To this end, I collect long-term monthly temperature data of 54 emerging markets. I calculate a country’s temperature deviation from its historical average, which approximates present-day climate change trends. Running regressions from 1994m1 to 2018m12, I find that higher temperature anomalies lower sovereign bond performances (i.e., increase sovereign risk) significantly for countries that are warmer on average and have lower seasonality. The estimated magnitudes suggest that affected countries likely face significant increases in their sovereign borrowing costs if temperatures continue to rise due to climate change. However, results indicate that stronger institutions can make a country more resilient towards temperature shocks, which holds independent of a country’s climate.
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Carbon Transition Risk and Corporate Loan Securitization
Isabella Müller, Huyen Nguyen, Trang Nguyen
IWH Discussion Papers,
No. 22,
2022
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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A Note on the Use of Syndicated Loan Data
Isabella Müller, Felix Noth, Lena Tonzer
IWH Discussion Papers,
No. 17,
2022
Abstract
Syndicated loan data provided by DealScan is an essential input in banking research. This data is rich enough to answer urging questions on bank lending, e.g., in the presence of financial shocks or climate change. However, many data options raise the question of how to choose the estimation sample. We employ a standard regression framework analyzing bank lending during the financial crisis of 2007/08 to study how conventional but varying usages of DealScan affect the estimates. The key finding is that the direction of coefficients remains relatively robust. However, statistical significance depends on the data and sampling choice and we provide guidelines for applied research.
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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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Understanding Climate Activism: Who Participates in Climate Marches Such As “Fridays for Future” and What Can We Learn from It?
Felix Noth, Lena Tonzer
Energy Research and Social Science,
February
2022
Abstract
Young people are marching around the globe to ask for measures against climate change and to protect the environment. Using novel survey data, we ask who participates in such powerful movements and what can be learned from our findings. The survey was conducted in German and is based on answers from more than 600 participants. We find that survey respondents are less likely to participate in climate marches like “Fridays for Future” in case they trust more in (large) corporations suggesting a link between trust and climate activism. We also ask whether worries about climate change or attitudes towards more environmentally friendly behavior match their participation frequency in climate marches. Results reveal that respondents being more worried about climate change or the environment tend to participate more often in marches addressing these concerns. Similarly, participation in climate marches correlates positively with acting environmentally sustainable. Hence, our findings might be relevant for corporations in case they want to keep the support of young customers participating in climate marches.
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Protest! Die Rolle kultureller Prägung im Volkswagenskandal
Felix Noth, Lena Tonzer
Wirtschaft im Wandel,
No. 3,
2020
Abstract
Die Aufdeckung manipulierter Abgaswerte bei Dieselautos des Herstellers Volkswagen (VW) durch die amerikanischen Behörden im Jahr 2015 brachte einen der größten Unternehmensskandale Deutschlands zutage. Dieser Skandal blieb nicht ohne Konsequenzen. Martin Winterkorn trat von seinem Amt als Vorstandsvorsitzender und Michael Horn als Chef von Volkswagen in den USA zurück. Viele VW-Kunden klagten gegen den Konzern, und in deutschen Großstädten wurde über Dieselfahrverbote diskutiert. Doch gab es auch eine Reaktion auf Konsumentenseite, also seitens der Autokäufer? Und wenn ja, spielen hier gesellschaftskulturelle Unterschiede wie zum Beispiel religiöse Prägung eine Rolle? Diesen Fragen geht ein im letzten Jahr erschienenes Arbeitspapier des IWH nach. Die empirische Analyse beschäftigt sich mit der Frage, ob Konsumenten nach dem VW-Skandal ihr Kaufverhalten stärker anpassen, wenn das gesellschaftliche Umfeld protestantisch geprägt ist. In der wissenschaftlichen Literatur zeigt sich, dass Protestanten mehr Wert auf eine Überwachung und Durchsetzung von Regeln legen, weshalb die Autoren von dieser Religionsgruppe eine ausgeprägtere Reaktion auf den VW-Skandal erwarten. Das Hauptergebnis der Studie legt dann genau diesen Schluss nahe: In den deutschen Regionen, in denen die Mehrheit der Bevölkerung dem protestantischen Glauben angehört, kam es zu signifikant höheren Rückgängen bei VW-Neuzulassungen infolge des VW-Skandals. Der Effekt ist umso stärker, je länger die Region durch protestantische Werte geprägt ist. Offenbar können bestimmte gesellschaftskulturelle Ausprägungen wie Religion und deren Normen ein Korrektiv für Verfehlungen von Unternehmen darstellen und somit verzögerte oder ausbleibende Maßnahmen von Politikern und Regulierern zum Teil ersetzen.
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Cultural Norms and Corporate Fraud: Evidence from the Volkswagen Scandal
Iftekhar Hasan, Felix Noth, Lena Tonzer
Abstract
We investigate whether cultural norms shaped by religion drive consumer decisions after a corporate scandal. We exploit the notice of violation by the US Environmental Protection Agency in September 2015 accusing Volkswagen (VW) of using software to manipulate car emission values during test phases. We show that new registrations of VW cars decline significantly in German counties with a high share of Protestants following the VW scandal. Our findings document that the enforcement culture in Protestantism facilitates penalising corporate fraud. We corroborate this channel with a survey documenting that Protestants respond significantly different to fraud but not to environmental issues.
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01.07.2020 • 11/2020
New Horizon 2020 project: The Challenge of the Social Impact of Energy Transitions
Funded by the European Commission’s Framework Programme Horizon 2020, the ENTRANCES project recently closed its kick-off meeting with a high scientific and institutional participation, and taking on the challenge of modeling the social impact of the energy transition.
Oliver Holtemöller
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Coal Phase-out in Germany – Implications and Policies for Affected Regions
Pao-Yu Oei, Hauke Hermann, Philipp Herpich, Oliver Holtemöller, Benjamin Lünenbürger, Christoph Schult
Energy,
April
2020
Abstract
The present study examines the consequences of the planned coal phase-out in Germany according to various phase-out pathways that differ in the ordering of power plant closures. Soft-linking an energy system model with an input-output model and a regional macroeconomic model simulates the socio-economic effects of the phase-out in the lignite regions, as well as in the rest of Germany. The combination of two economic models offers the advantage of considering the phase-out from different perspectives and thus assessing the robustness of the results. The model results show that the lignite coal regions will exhibit losses in output, income and population, but a faster phase-out would lead to a quicker recovery. Migration to other areas in Germany and demographic changes will partially compensate for increasing unemployment, but support from federal policy is also necessary to support structural change in these regions.
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