Publication Type
Working Paper
Version
publishedVersion
Publication Date
1-2025
Abstract
This study examines how euro area banks factor pollution-induced biodiversity risks into lending decisions, using data from 832 banks and 5,000 major polluters. Our results show that banks are increasingly pricing these risks by adjusting loan-to-value ratios and interest rates. Banks adjust lending conditions in line with EU pollution and biodiversity protection legislation, particularly for companies with large pollution footprints near biodiversity-protected areas or those contributing to Environmental Quality Standards failures of downstream surface waters. The former is driven primarily by banks’ adoption of biodiversity policies and public commitments to the Equator Principles, while the latter is a result of regulatory risks. Our findings inform financial supervisors on how banks manage risks associated with the EU’s zero pollution ambition, shed light on the interplay between biodiversity protection legislation and banks’ lending decisions, and offer actionable guidance on leveraging existing regulatory frameworks to address the climate-biodiversity-pollution nexus.
Keywords
Biodiversity loss, chemical pollution, loan pricing, EU Biodiversity Strategy, Natura2000
Discipline
Environmental Policy | Environmental Sciences
First Page
1
Last Page
79
Citation
HIRSCHBÜHL, Dominik; CEGLAR, Andrej; COJOIANU, Theodor; EMAMBAKHSH, Tina; QI, Yifan; RHO, Caterina; HU, Elsie; PETRACCO, Marco; BIGANZOLI, Fabrizio; DE JAGER, Alfred; GARCIA HERRERO, Laura; MANDRICI, Andrea; and PASQUA, Carlo.
The climate-biodiversity-pollution nexus: The pricing of environmental credit risks for European industrial polluters. (2025). 1-79.
Available at: https://ink.library.smu.edu.sg/cis_research/469
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.