Title page
Contents
Abstract 2
Non-Technical Summary 3
1. Introduction 6
2. Literature 9
3. Data 13
4. Do Banks Price Climate Risk? 17
4.1. Banks' pricing of climate risk 17
4.2. Role of banks' commitment in climate risk pricing 21
5. Does Monetary Policy Affect Banks' Pricing of Climate Risk? 23
5.1. Impact Effects 23
5.2. Dynamic Responses 26
5.3. Survey-based Evidence 27
6. Conclusion 29
References 31
Appendix 43
Table 1. Summary statistics 39
Table 2. Do Banks Price Climate Risk? 40
Table 3. Do Committed Banks Place a Higher Price on Climate Risk? 41
Table 4. How Does Monetary Policy Impact the Pricing of Climate Risk? 42
Figure 1. Average interest rates charged to high-emission and low-emission firms 36
Figure 2. Average interest rates charged to firms non-committed and to those committed to lower carbon emissions 36
Figure 3. Local projection estimates of the response of lending spreads and volumes to a 25-basis-points restrictive monetary policy shock (rise in MPt) 37
Figure 4. Net percentages of banks reporting changes in terms and conditions or credit standards in the past 12 months, based on the July 2023 BLS Survey 38
Table A1. Do Banks Price Climate Risk? Alternative clustering 43
Table A2. Do Banks Price Climate Risk? Firm Control Variables Instead of PD 44
Table A3. How Does Monetary Policy Impact the Pricing of Climate Risk? Reaction to the Quantitative Tightening of December 2021 45
Table A4. How Does Monetary Policy Impact the Pricing of Climate Risk? Reaction to the Rate Hike of July 2022 46
Table A5. Climate Risk, Committment and Monetary Policy: Effects on Quantities 47
Table A6. Cimate Risk and Monetary Policy Excluding Banks Subject to Climate Stress Test 48