The project investigates how the financial sector – and banks in particular – can support the transition to a climate-neutral economy. At its core is the question of how financing decisions can help foster investment in climate-friendly technologies and greater energy efficiency.

The first research area focuses on lending to corporates. It examines how climate-related regulation and the growing demand for sustainable financial products affect bank lending to firms – and whether this ultimately encourages greener business activities. The project also explores which financial instruments, including green bonds, are particularly effective in mobilizing capital for green investments.

The second research area focuses on households and the housing sector. It investigates how credit can facilitate investments in energy efficiency and how climate policy objectives can be reconciled with prudential lending standards and financial stability. This is particularly relevant in the housing sector, where substantial additional investment is needed to achieve the targeted reductions in emissions.

The project focuses on Europe, where banks are a key source of finance for both firms and households. Using state-of-the-art empirical methods and detailed micro-level data on banks, loans, firms and households, the project provides an empirical basis for both academic and policy debates. Its goal is to better understand the conditions under which the financial sector can effectively contribute to the transition to a climate-neutral economy.