Does climate risk affect the carbon footprint of bank loans? Evidence from physical and transition risks

Key Points

• Carbon footprint of bank loans is significantly influenced by climate risk factors, including physical and transition risks.
• Higher climate risk correlates with increased carbon footprint, indicating a need for sustainable financial practices.
• Analysis assesses the relationship of climate risk with carbon emissions specific to financial institutions.
• Findings highlight the importance of integrating climate considerations into lending practices to reduce environmental impact.