Carbon intensive lending makes banks less efficient: IIM study
image for illustrative purpose
New Delhi: Banks with greater exposure to carbon-intensive sectors are likely to incur higher credit risk over time, leading to increased monitoring and recovery costs, IIM Lucknow researchers have found in their study.
A team of researchers from the institution conducted a study providing insights into how banks’ lending patterns toward carbon-intensive sectors shape their long-term financial health and operational efficiency.
Published in the Journal of International Financial Markets, Institutions and Money, the research flagged that sustainability and financial performance are interconnected, and it is essential to align financial strategies with the global transition to a low-carbon economy.
While banks do not emit carbon directly, they indirectly play a role by financing high-carbon industries such as fossil fuels and heavy manufacturing.
