Banks’ environmental policies and banks’ financial stability

Laura Chiaramonte, Alberto Dreassi, John W. Goodell*, Andrea Paltrinieri, Stefano Piserà

*Autore corrispondente per questo lavoro

Risultato della ricerca: Contributo in rivistaArticolo in rivista

Abstract

We study whether environmental engagement of banks mitigates the effects of natural disasters and climate-change related events on financial stability. Employing an extensive global dataset with quarterly data (2003–2019; 5,317 observations), our analysis reveals that environmental innovation financing, product responsibility, and resource reduction policies are able to curtail the repercussions on stability of economic costs due to environmental events. We also find that the lending function of banks is a relevant mediating channel for this relationship. Since borrowers’ vulnerability to climate issues may be reflected in non-performing loans, banks’ environmental engagement provides protection against future related credit losses. Moreover, by capitalizing on global disasters as quasi-natural experiments, we provide empirical evidence confirming that a stronger environmental engagement of banks enhances their post-event financial resilience. Taken together, our results convey several key implications: i) bank executives can improve financial stability by embracing environmental policies, ii) stronger regulatory actions towards environmental sensitivity in the banking sector is supported, and iii) environmentally engaged banking systems can mitigate the economic costs associated with climate change and environmental disasters.
Lingua originaleEnglish
pagine (da-a)1-20
Numero di pagine20
RivistaJOURNAL OF INTERNATIONAL FINANCIAL MARKETS, INSTITUTIONS & MONEY
Volume91
DOI
Stato di pubblicazionePubblicato - 2024

Keywords

  • Bank stability
  • Climate change
  • Natural disasters
  • Sustainability

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