The Carbon Footprint of Italian Loans

Abstract

This article presents a first insight on the carbon content of business loans in Italy, using three different methods to identify the sectors more exposed to transition risks. According to our estimates, the loans’ carbon footprint of Italian banks is small compared to other European peers and the outstanding loans exposed to transition risk can be estimated in a range between 37 and 53 percent of total loans as of 2018 data, according to the methodology used. This information can be used as a starting point to evaluate, within a climate-scenario framework, how different climate policies influence the stability of the banking sector.

Keywords: climate change, financial stability, climate stress test, transition risk

JEL Classification: Q54, G21, G28