'Climate Conscious' Banks Lend More to Polluters: ECB

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'Climate Conscious' Banks Lend More to Polluters: ECB

December 8: Eurozone banks that portray themselves as more conscious about environmental issues lend more than others to polluting industries, a group of European Central Bank economists said on Wednesday.

Banks have a key role in financing the green transition, and their lending practices and environmental standards are under growing scrutiny.

The four ECB economists looked at investor reports and releases from major banks in the single currency area over the period from 2014 to 2020.

Their research highlighted a "discrepancy about how banks talk about environmental intentions, and how they lend," they said in a blog post, released to coincide with the COP28 climate talks in Dubai.

It found that banks with high levels of "environmental disclosures" tend to be specialised in extending credit to so-called "brown industries" -- those that are highly polluting.

This fits in with the notion that lenders with greater exposure to polluting industries are under greater pressure to disclose environmental strategies and plans for decarbonisation, they said in the blog.

But they also found that firms with large carbon footprints that obtain loans from such banks do not ultimately decrease their emissions or commit to voluntary emission targets.

In addition, lenders who portray themselves as more climate friendly also appeared reluctant to lend to young firms in polluting sectors -- precisely the sort of companies that could drive innovation in clean technologies, the economists said.

Such a situation had arisen because banks were "reluctant to disrupt established lending relationships with larger carbon footprint borrowers," they said. -- AFP/RSS



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