Economics and Finance Seminar: Jiri Tresl (Paris Business School)

Nature-Related Risks in Syndicated Lending

We examine whether banks price firms’ dependence on nature. Loan spreads are higher for firms that depend more heavily on nature. A 1% increase in dependence is associated with a 0.32% increase in spreads. We provide evidence consistent with a causal interpretation by using two quasi-natural experiments that change lenders’ information and firms’ costs of nature dependence. Greater dependence is also associated with stricter non-price terms, including shorter maturities and a higher likelihood of collateral requirements. Our results suggest that credit markets price some risks related to nature, though the effect is economically modest.

Room A406