Do Banks’ Climate Disclosures Inform Us About Climate-Related Lending?

We perform textual analysis to assess banks’ climate-related disclosures in public reports. Banks have greatly increased the quantity and quality of their climate risk discussions over time. We find that higher disclosure scores are associated with a lower probability that a loan is made to a borrower in the climate policy-relevant sector. This association is stronger for banks headquartered in countries with a mandatory ESG disclosure requirement. In contrast, we find mixed evidence when comparing banks with and without a voluntary climate commitment. Our findings indicate that public climate reports contain valuable information about banks’ lending practices.