{
  "title": "Carbon Risk in Loan Pricing: Commitment Channels and Real Effects",
  "publication": "IMF Working Papers, December 5, 2025",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2025/12/05/carbon-risk-in-loan-pricing-commitment-channels-and-real-effects-571321",
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  "summary": "We study how carbon risk affects the pricing of U.S. corporate loans and how firms’ and lenders’ commitments influence both loan terms and business decisions.",
  "sections": [
    {
      "heading": "Main findings",
      "content": "- Financial institutions charge higher loan risk spreads to borrowers with a higher carbon intensity, documenting a carbon risk premium.\n- The carbon premium varies with environmental commitments of borrowers and lenders:\n  - Borrowers signaling commitments—emission targets, emission disclosures, or green loans—receive discounts that decline with increasing carbon intensity.\n  - Committed lenders charge higher interest rates to carbon-intensive borrowers.\n- Commitments affect real economic outcomes:\n  - Increase corporate investment.\n  - Increase R&D expenditures.\n  - Reduce precautionary liquidity holdings.\n- The carbon premium in U.S. loan markets intensifies during periods of monetary tightening, consistent with the risk-taking channel of monetary policy.\n- The carbon premium is time varying and has declined in recent years."
    },
    {
      "heading": "Data and scope",
      "content": "- Combines syndicated loan data with firm-level carbon emissions.\n- Focus: U.S. corporate loans."
    },
    {
      "heading": "Policy-relevant implications",
      "content": "- Lender and borrower environmental commitments influence both financial pricing and real corporate behavior, suggesting policy and disclosure frameworks can affect real-economy outcomes via loan markets.\n- Monetary policy episodes matter for the transmission of carbon risk into loan pricing, indicating interaction between macroprudential/monetary policy and climate-related financial risk.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2025/12/05/carbon-risk-in-loan-pricing-commitment-channels-and-real-effects-571321"
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    "Authors: Yao Dong, Martina Hengge, Fabian Valencia, Richard Varghese",
    "Published: December 5, 2025",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229026154.001",
    "Financial institutions charge higher loan risk spreads to borrowers with a higher carbon intensity, documenting a carbon risk premium.",
    "The carbon premium varies with environmental commitments of borrowers and lenders:",
    "Commitments affect real economic outcomes:",
    "The carbon premium in U.S. loan markets intensifies during periods of monetary tightening, consistent with the risk-taking channel of monetary policy.",
    "The carbon premium is time varying and has declined in recent years.",
    "Combines syndicated loan data with firm-level carbon emissions.",
    "Focus: U.S. corporate loans.",
    "Lender and borrower environmental commitments influence both financial pricing and real corporate behavior, suggesting policy and disclosure frameworks can affect real-economy outcomes via loan markets.",
    "Monetary policy episodes matter for the transmission of carbon risk into loan pricing, indicating interaction between macroprudential/monetary policy and climate-related financial risk.",
    "**Working Paper**"
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