Greenhouse Gas Emissions and Loan Markets in Japan

This chapter investigates whether banks consider a firm’s greenhouse gas (GHG) emissions in their lending decisions, using Japan as a case study. We find that loans to high GHG emitters, in terms of level and intensity, are associated with lower loan growth rates. In addition, we provide evidence that the effect of GHG emissions is driven mainly by supply-side rather than demand-side factors. Furthermore, we provide evidence that insurance company loans are also affected by borrowers’ GHG emission levels.