What does this research mean for the field?

Climate-related transition risk significantly degrades credit quality in European banks, particularly small ones, but this negative impact is mitigated by strong institutional quality and active ESG commitments. Novelty: ClaimNovelty.INCREMENTAL. Consensus alignment: ConsensusAlignment.NEUTRAL.

What question did this study set out to answer?

This research aims to explore the effects of climate-related risks on loan quality in European banks and the role of institutional quality and ESG strategies.

November 7, 2025Research in International Business and FinanceOpen Access

Climate-related risks and loan quality in Europe: Do institutional quality, environmental commitment, and bank size matter?

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Authors

EFElisa Di FeboUniversity of Chieti-Pescara EAEliana AngeliniUniversity of Chieti-Pescara TLTu LeVietnam National University Ho Chi Minh City

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Implication

This research examines how climate-related risks affect credit quality in European banks, suggesting implications for risk management.

Key Points

This research aims to explore the effects of climate-related risks on loan quality in European banks and the role of institutional quality and ESG strategies.
Analyzed a sample of 127 banks across 27 European countries from 2005 to 2023.
Utilized fixed-effects models to assess impacts of transition and physical risks.
Conducted robustness tests considering bank size and disaggregated samples.
Transition risk significantly degrades credit quality in EU banks, particularly in emission-intensive sectors.
Institutional quality effectively mitigates negative impacts of climate-related risks on loan quality.
Small banks exhibit greater vulnerability to climate risks, while ESG-oriented banks respond more effectively.

Cite This Study

Febo et al. (2025) studied this question.

synapsesocial.com/papers/6a1ca2d35a7763abe7898942 https://doi.org/10.1016/j.ribaf.2025.103206

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Climate-related risks and loan quality in Europe: Do institutional quality, environmental commitment, and bank size matter?

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Implication

Key Points

Cite This Study

Climate-related risks and loan quality in Europe: Do institutional quality, environmental commitment, and bank size matter?

Discussion

Member takes

Implication

Key Points

Cite This Study

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