Climate policy uncertainty and bank credit growth: evidence from China

We investigate the impact of climate policy uncertainty (CPU) on bank credit growth. We utilize panel data from 360 Chinese commercial banks over the period from 2008 to 2022. The main findings are as follows. First, CPU significantly reduces bank credit growth. Second, the negative impact of CPU on credit growth is more pronounced for non-listed banks than for listed ones; among different bank types, city commercial banks are most affected by CPU, whereas joint-stock commercial banks are least affected. In addition, we find high levels of CPU mitigate the adverse effect of non-performing loans on credit growth, while exacerbating the negative effect between the growth rate of the broad money supply on credit growth. Further robustness tests confirm the reliability of our results. We provide important policy implications, highlighting the significance of stable climate policies for financial markets and offering new insights for banks in adjusting their credit strategies.