Pricing Carbon Risk: Investor Preferences or Risk Mitigation?

S. Kleimeier, M. Viehs

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Do banks charge an environmental premium when lending to publicly listed firms? Using a unique and comprehensive database on carbon emissions, we find that higher carbon emissions are associated with higher loan spreads. This effect exists for loans arranged by all lenders suggesting that spread premia are driven by environmental risks rather than investor preferences. Consistent with ex-post risk, companies without appropriate board-level responsibility pay higher spreads. While countries might introduce effective legislation to mitigate the effects of climate change, our results indicate that there is scope for a market-based solution to complement explicit environmental regulation.
Original languageEnglish
Article number109936
Number of pages4
JournalEconomics Letters
Volume205
Issue number109936
DOIs
Publication statusPublished - Aug 2021

Fingerprint

Dive into the research topics of 'Pricing Carbon Risk: Investor Preferences or Risk Mitigation?'. Together they form a unique fingerprint.

Cite this