No abstract

Do cross-country differences in climate policy influence bank lending? This paper focusses on the period 2007-2017 and uses syndicated loan-level data to examine if the stringency of home-country climate policies increases cross-border bank lending. Loan fixed effects allow us to disentangle loan demand from supply and to control for unobserved and observed loan and firm characteristics. I find evidence that a strict homecountry climate policy is associated with an increase in banks' cross-border loan shares. This suggests that the transition to a low-carbon economy might be threatened if global coordination between governments is not enforced.