Financial Institutions and Sustainability

Banks, insurance companies, and pension funds play a crucial role in financing the green transformation. As we navigate toward more sustainable practices, a substantial reallocation of financial capital becomes imperative. This transition demands a significant shift in investment patterns towards more sustainable business models.

This research theme delves into the role of financial institutions in recognizing sustainability risks. By exploring the influence of financial institutions when allocating resources, this research unit aims to clarify if and how these providers can assume a proactive stance. This research theme spans various dimensions, encompassing strategies for identifying, assessing, and managing sustainability risks. Ultimately, our goal here is to pave the way for a more responsible and impactful allocation of financial resources towards sustainable initiatives.

Banks are increasingly factoring climate risk into the loans they offer to fossil fuel companies, according to this new research paper by ISF theme leadSteven Ongena et al. As a result, companies holding on to large reserves of coal, oil, and gas could face significantly higher borrowing costs in the future, especially in regions with stricter climate policies. 

Learn more about this research focus:

Fossil fuel firms face growing loan rates as climate concerns mount: will this accelerate their decline?

Flood, farms, and credit: The role of branch banking in the era of climate change
Pejman Abedifar, Seyed Javad Kashizadeh, and Steven Ongena
Journal of Corporate Finance (forthcoming)

Being stranded with fossil fuel reserves? Climate policy risk and the pricing of bank loans
Manthos D. Delis, Kathrin de Greiff, Maria Iosifidi, and Steven Ongena
Financial Markets, Institutions & Instruments (forthcoming)

Climate change risk and the cost of mortgage credit
Duc Nguyen, Steven Ongena, Shusen Qi and Vathunyoo Sila
Review of Finance (2022)

The Impact of Foreign Sanctions on Firm Performance in Russia
Luu Duc Toan Huynh, Khanh Hoan, Steven Ongena
Swiss Finance Institute Research Paper (2023)

Value-Driven Bankers and the Granting of Credit to Green Firms
Di Bu, Matti Keloharju, Yin Liao, Steven Ongena
Swiss Finance Institute Research Paper (2023)