Problem
Banks are under growing pressure to stop lending money to companies that produce high levels of carbon emissions. But do companies that lose access to bank lending cut their emissions? Or do they simply say the right things while carrying on as before? These questions matter enormously for climate policy. If bank pressure doesn't lead to real reductions in emissions, then one of the main tools governments and regulators are counting on may not work.
Science
We studied a global sample of 2,216 companies that borrowed money through syndicated loans between 2013 and 2018. We focused on 27 banks that made early public commitments to the Science Based Targets initiative, a programme that sets science-based emissions reduction goals, including BBVA, BNP Paribas, HSBC, ING and Standard Chartered. These banks participated in approximately 80% of the loans in our sample. We tracked what happened to companies that had previously borrowed from these banks, comparing them to similar companies that had not. We measured changes in borrowing, investment, company size and, crucially, actual carbon emissions.
Outcome
We found that when a bank made a climate commitment, companies with higher direct carbon emissions that had previously borrowed from that bank received less credit. Companies with higher emissions borrowed less overall. Total borrowing fell by 5.5% and bank lending fell by 10.4%. Committed banks didn't reduce loan sizes gradually — they stopped lending to high-emission companies altogether. Companies that lost access to credit cut their investment by 4% and shrank the overall size of their businesses by 2%.
Despite all of this, actual carbon emissions did not fall. Not in the short term. Not over three years. Companies did not make new commitments to reduce emissions either. Instead, they improved their environmental scores with rating agencies such as MSCI, but only through better communication and disclosure, not through real environmental action. Committed banks did not treat these improvements as credible and continued to cut lending.
Change
Bank climate commitments do change lending behaviour, and that change is real and measurable. But lending pressure alone is not enough to make companies cut their emissions. Companies respond by shrinking, cutting investment and improving their public image, not by becoming greener. This matters for regulators, central banks and policymakers who are counting on the financial sector to drive decarbonisation. Our findings suggest that voluntary bank commitments need to be paired with policies that directly reward companies for reducing emissions, not just for talking about it. Without that, credit reallocation shifts money away from high-emission companies without reducing the emissions themselves.
Professor Marcin Kacperczyk, ³Ô¹ÏºÚÁÏ Business School.
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