Climate risk and credit supply in Spain

Abstract

Rationale The 2015 Paris Agreement is a milestone in the global fight against climate change. Against this backdrop, and as a result of credit institutions’ alignment with the agreement, it is important to analyse its impact on lending to firms. Takeaways •The 2015 Paris Agreement represents one of the first initiatives intended to foster the transition to a greener economy and, consequently, to reduce carbon dioxide (CO2) emissions. •The findings of this article show that lending by Spanish credit institutions to more polluting firms appears to have declined somewhat between 2014 and 2019. •The evidence presented also suggests that, during that period, the banks most exposed to climate risk reduced their supply of credit to firms operating in more polluting sectors in order to mitigate this risk. However, in quantitative terms, the effects are moderate.