Heavy carbon emitters are increasingly subject to higher interest rates from banks, according to new research. In a new report, the European Central Bank (ECB) found that eurozone banks were charging companies in the top 25% of carbon emitters monthly interest rates14 basis points higher on average than those in the lowest 25%. In parallel, two studies conducted by Dutch central bank De Nederlandsche Bank (DNB) used companies’ carbon emissions as an indicator of their exposure to transition risks, comparing the data to bond yield spreads. The DNB identified a clear price difference (up to 40 basis points) between the costs of borrowing for companies with relatively high emissions, compared to those with low or no carbon emissions, since 2020. DNB attributed this in part to the introduction of stricter climate policies in the EU, such as the European Green Deal and the Fit for 55 package. The combined research demonstrates that Europe’s financial markets are increasingly pricing in climate-related risks, which should bolster incentives for companies to decarbonise their operations and develop clear transition plans. Separately, The People’s Bank of China (PBOC) has announced it would extend a programme providing financial institutions with low-cost loans to support emissions-reduction projects by companies to the end of 2027. The scheme was first launched in 2021. The PBOC also said it would develop tax and investment policies to support China’s climate transition efforts, including the promotion of electric vehicles, energy- and water-saving home appliances, and the use of more environmentally friendly building materials.
