Banks' Climate Sentiments Affect Low-Carbon Transition

Mazzocchetti et al. (2025) present analysis of how banks’ climate sentiments affect credit risk adjustments and the low-carbon transition.

• Model & approach: They use the EIRIN macro-financial Stock-Flow Consistent model calibrated to the Austrian economy, modeling banks’ climate sentiments with NGFS low-carbon transition scenarios, where sentiments are formed based on firms’ energy technology alignment and perceived policy credibility (confirmed modelling and calibration actions).
• Quantitative findings (confirmed): High climate sentiments → 4.5% reduction in GHG emissions-to-GDP ratio and 0.6% increase in GDP growth versus the Net Zero scenario without sentiments; Low climate sentiments → 8.5% increase in GHG emissions-to-GDP ratio; Credit constraints on low-carbon investments → 15% increase in GHG emissions-to-GDP ratio.