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Contribution Details

Type Conference Presentation
Scope Discipline-based scholarship
Title "Too-Big-To-Strand?" Bond Versus Bank Financing in the Transition to a Low-Carbon Economy
Organization Unit
  • Steven Ongena
Presentation Type speech
Item Subtype Original Work
Refereed Yes
Status Published in final form
  • English
Event Title Tinbergen Finance Research Seminars
Event Type other
Event Location Tinbergen
Event Start Date May 25 - 2022
Event End Date May 25 - 2022
Abstract Text What is the role market- and bank-based debt play in the climate transition process? We present evidence that bond markets price the risk that assets held by fossil fuel firms strand, while banks in the syndicated loan market seemingly do not price this risk much. Consequently, to fulfill their financing needs fossil fuel firms increasingly rely less on bonds and more on loans. We can interpret the within-firm bond-to-loan substitution along stranding risk as a contraction in the supply of bond versus bank funding. Within the banking sector especially the big banks are willing to provide cheaper and more financing to fossil fuel firms.
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