"glossy green" banks: The disconnect between environmental disclosures and lending activities

Abstract

mariassunta giannetti, martina jasova, maria loumioti, caterina mendicino working paper series “glossy green” banks: the disconnect between environmental disclosures and lending activities no 2882 disclaimer: this paper should not be reported as representing the views of the european central bank (ecb). the views expressed are those of the authors and do not necessarily reflect those of the ecb. abstract: using confidential information on banks’ portfolios, inaccessible to market participants, we show that banks that emphasize the environment in their disclosures extend a higher volume of credit to brown borrowers, without charging higher interest rates or shortening debt maturity. these results cannot be attributed to the financing of borrowers’ transition towards greener technologies and are robust to controlling for banks’ climate risk discussions. examining the mechanisms behind the strategic disclosure choices, we highlight that banks are hesitant to sever ties with existing brown borrowers, especially if they exhibit financial underperformance. keywords: financial institutions, sustainability reporting, strategic disclosure, credit exposure, zombie lending jel classification: g11, g15, g21 ecb working paper series no 28xx ecb working paper series no 28821 non-technical summary the growing emphasis on banks’ sustainability disclosures has raised concerns about whether they truly reflecting environmental goals rather than simply inflating positive intentions. this debate …

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