Center for Advancing Accounting

“Glossy Green” Banks: The Disconnect Between European Banks’ Sustainability Reporting and Lending Activities

• In Event: Susatinability and Lending Activities

Abstract

We study the relation between banks’ stated climate goals and lending activities. We create a proxy for environmental-themed disclosures using content analysis on banks’ investor reports. Taking advantage of granular loan-level data from a new central repository at the European Central Bank, we find no association between banks’ climate-related disclosures and credit exposure or new lending activity in brown industries. The disconnect between banks’ environmental reporting and brown lending is not offset by a greater lending activity in green sectors. Our interpretations continue to hold when exploring banks’ (changes in) credit exposures across industries. Overall, our study presents preliminary evidence of European banks’ unsubstantiated claims about their environmental agenda and impact.

Authors

• Mariassunta Giannetti, Stockholm School of Economics

• Maria Loumioti, The University of Texas at Dallas

• Caterina Mendicino, European Central Bank