Green credit policy and corporate climate risk exposure

Abstract

This paper investigates the effects of green credit policies on corporate climate risk exposure and the underlying mechanisms in China. Our results show that after the introduction of green credit policies, enterprises in polluting industries experienced a notable decline in climate risk compared to their counterparts. Further analysis reveals that the effectiveness of green credit policies in mitigating corporate climate risks can be attributed to their capacity to foster green technological innovation, refine investment strategies, facilitate the process of digitalization, and enhance the visibility of environmental issues among analysts. Moreover, we find that climate risk shaping policies vary significantly among firms, with particularly pronounced impacts on financially constrained and state-owned enterprises. This study provides critical insights for policymakers aiming to address climate challenges and bolster green financial strategies.