Home | Events Archive | Too-Big-to-Strand? Bond versus Bank Financing in the Transition to a Low-Carbon Economy
Seminar

Too-Big-to-Strand? Bond versus Bank Financing in the Transition to a Low-Carbon Economy


  • Series
    TI Finance Research Seminars
  • Speaker(s)
    Steven Ongena (University of Zurich, Switzerland)
  • Field
    Finance, Finance
  • Location
    Tinbergen Institute Amsterdam, room 1.01
    Amsterdam
  • Date and time

    May 25, 2022
    12:45 - 14:00

What is the role market- and bank-based debt play in the climate transition process? We present evidence that bond markets price the risk that assets held by fossil fuel firms strand, while banks in the syndicated loan market seemingly do not price this risk much. Consequently, to fulfill their financing needs fossil fuel firms increasingly rely less on bonds and more on loans. We can interpret the within-firm bond-to-loan substitution along stranding risk as a contraction in the supply of bond versus bank funding. Within the banking sector especially the big banks are willing to provide cheaper and more financing to fossil fuel firms. Joint with Winta Beyene, Kathrin De Greiff, and Manthos Delis.

Link to paper.