Abstract
Investing heavily in the transition to renewable energy is essential for global sustainability. Companies in the renewable energy sector often use bank financing for day-to-day operations and capital expenditures. This research looks at the effect of financial ties between renewable energy companies and banks on both industries' viability as they make the switch to renewable power sources. We analyze a large worldwide sample of renewable energy firms and banks to see how these interdependencies affect the long-term viability of both industries. According to our findings, the effectiveness of the shift is heavily impacted by the degree of interconnection between renewable energy businesses and banks. Financing costs are reduced and investments in renewable energy projects are encouraged when banks have a higher exposure to renewable energy enterprises. In addition to highlighting the importance of these linkages, our research also emphasizes the possible hazards associated with them, such as financial contagion and systemic risk, and underscores the necessity for effective risk management methods. In conclusion, this study highlights the need for a coordinated strategy to the renewable energy transition that weighs the advantages and disadvantages of interconnection. We show that there are both positive and negative outcomes that can result from the relationship between financial institutions and renewable energy enterprises, and we highlight the duty of policymakers and regulators to ensure that banks have adequate exposure to the industry while closely monitoring associated risks.
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