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Climate Risk, Soft Information, and Credit Supply

Author

Listed:
  • à lvarez-Román, Laura
  • Mayordomo, Sergio
  • Vergara-Alert, Carles
  • Vives, Xavier
Abstract
We study a model of the impact of climate risk on credit supply and test its predictions using data on all wildfires and corporate loans in Spain. Our findings reveal a significant decrease in credit following climate-driven events. This result is driven by outsider banks (large and diversified), which reduce lending significantly to firms in affected areas. In contrast, local banks (geographically concentrated), due to their access to soft information, reduce their loans to opaque affected firms to a lesser extent without increasing their risk. We also find that employment decreases in affected areas where local banks are not present.

Suggested Citation

  • à lvarez-Román, Laura & Mayordomo, Sergio & Vergara-Alert, Carles & Vives, Xavier, 2023. "Climate Risk, Soft Information, and Credit Supply," CEPR Discussion Papers 18661, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18661
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    More about this item

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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