Climate efficiency issues for financial institution credit score within the euro space

10 November 2025

By Petra Köhler-Ulbrich, Yuma Schuster and Nikoleta Tushteva

Reducing a agency’s carbon emissions or bettering the vitality effectivity of a constructing may help companies and households to get a mortgage from the financial institution at extra beneficial situations, the euro space financial institution lending survey (BLS) finds. According to the banks surveyed, the local weather efficiency of companies and buildings additionally impacts mortgage demand from corporations and households.^[1] In this weblog publish, we summarise these tendencies and discover what’s behind them.

Climate threat and financial institution lending to corporations

How do local weather dangers have an effect on the lending situations banks provide to inexperienced corporations, high-emitting corporations and people in transition to inexperienced? Overall, our survey exhibits that banks’ credit score requirements (i.e. their inner pointers and mortgage approval standards), phrases and situations for loans are notably affected by the local weather efficiency of their shoppers. Since we launched this query to the financial institution lending survey in 2023, banks have reported an easing affect of local weather threat and measures to deal with local weather change on their credit score requirements, phrases and situations for inexperienced corporations and people in transition.

To put these findings into perspective, we have to take a better take a look at how the BLS works. Every quarter, we ask about 150 banks from all euro space international locations if they’ve tightened or eased their credit score requirements, phrases and situations for loans to corporations and households, or whether or not they have stored them broadly unchanged in contrast with the earlier quarter. The survey additionally asks banks whether or not the demand they see for loans has elevated, decreased, or remained broadly unchanged. Banks additionally report on the elements which have pushed such developments, in addition to on their expectations for the long run. In addition, the BLS asks banks some topical questions, which embody the local weather change-related ones we’re discussing on this publish.^[2]

Back to our findings: as talked about above, we see that local weather threat and measures to deal with local weather change had an easing impact on euro space banks’ credit score requirements for loans to inexperienced corporations and corporations in transition. In reality, within the July 2025 BLS a internet share of banks of 20% talked about an easing affect on their credit score requirements for inexperienced corporations, and 13% for corporations in transition over the previous 12 months (Chart 1, panel a).

By distinction, local weather threat had a tightening affect for loans to high-emitting corporations, which haven’t made a lot progress with the inexperienced transition or haven’t even began it but (reported by a internet share of banks of 35%).^[3] This means that banks provide a “climate discount” of their threat evaluation to inexperienced corporations and people in transition. Also, they appear to cost a “climate risk premium” for high-emitting corporations.^[4] In different phrases, banks appear to grant loans at extra beneficial phrases to environmentally pleasant firms and people investing to change into greener. That means that banks think about local weather dangers and measures to deal with local weather change of their general threat administration.

We will now take a better take a look at the various factors banks think about when giving out loans to corporations. In their lending insurance policies, banks assess corporations’ transition threat, affecting the firm-specific state of affairs and outlook, as an example concerning creditworthiness and the worth of corporations’ property. They additionally take into consideration corporations’ bodily threat, which might have an effect on the worth of collateral and the corporate worth extra usually (Chart 1, panel b).^[5] The former are dangers that come up from shifting in the direction of a carbon-neutral financial system, which might result in monetary losses linked to adjustment processes. The latter captures corporations’ publicity to a altering local weather, together with extra frequent or extreme climate occasions, and dwindling ecosystems.

Based on the survey outcomes from 2023-25, each transition threat and bodily threat had a tightening affect on financial institution lending insurance policies to corporations.

This affect may deepen sooner or later. Banks count on bodily threat to tighten their credit score situations for corporations in internet phrases over the subsequent 12 months: 18% of banks count on a tightening affect, whereas 8% count on an easing affect. Meanwhile, banks count on a broadly zero internet affect of transition threat over the subsequent 12 months, with an equal share of banks (16%) anticipating a tightening and an easing affect of transition threat. This distinction of opinion between banks could trace at uncertainty in regards to the future affect of the inexperienced transition.

Still, we see a hanging shift on transition threat, with banks anticipating a broadly unchanged affect of transition threat on their lending situations over the subsequent 12 months. This is considerably decrease than the reported realised affect within the earlier two survey rounds (Chart 1, panel b). It could also be associated to corporations’ progress on the inexperienced transition. Banks additionally reported a useful affect of climate-related fiscal assist over the previous 12 months, bettering the possibilities of mortgage approval and mitigating the financing prices for corporations managing the inexperienced transition. This easing affect is predicted to extend over the subsequent 12 months.

Chart 1

Impact of local weather change on credit score requirements for loans to euro space corporations, and driving elements

a) Impact on credit score requirements for loans to corporations	b) Impact of climate-related elements on financial institution lending situations for loans to corporations

Next to the availability facet, the BLS signifies that local weather change additionally has an affect on demand for credit score. According to the banks surveyed, local weather change fuelled mortgage demand from inexperienced corporations and corporations in transition, particularly for inexperienced funding functions. Meanwhile, banks reported a dampening impact of local weather change on mortgage demand from high-emitting corporations (Chart 2, panel a). This may replicate the truth that these corporations haven’t but began the inexperienced transition or made little progress up to now. In reality, banks reported that corporations’ climate-related mortgage demand has been primarily pushed by mounted funding like equipment, tools and buildings. Banks additionally indicated company restructuring associated to local weather change together with preferential financial institution lending charges for inexperienced tasks or applied sciences as drivers behind mortgage demand (Chart 2, panel b).^[6] By distinction, high-emitting corporations could have delayed inexperienced funding partly attributable to uncertainty about future climate-related regulation. This uncertainty was talked about by a internet 11% of banks as an element dampening corporations’ mortgage demand. Likewise, firm-specific financing situations which are comparatively much less beneficial, and a attainable lack of inexperienced administration practices could have weighed on mortgage demand.^[7] The BLS exhibits that banks count on these developments to persist over the subsequent 12 months, as uncertainty about future local weather regulation may proceed to dampen corporations’ demand for lending. Meanwhile, financing wants for mounted funding stay excessive and preferential financial institution lending charges and monetary assist for inexperienced investments may drive mortgage up demand.

Chart 2

Impact of local weather change on demand for loans to euro space corporations, and driving elements

a) Impact on mortgage demand to corporations	b) Impact of climate-related elements on mortgage demand to corporations

Climate threat and financial institution lending to households for home buy

Banks additionally take local weather threat under consideration when lending to households for home buy. While a excessive vitality efficiency of buildings has had an easing affect on banks’ credit score requirements in line with the survey outcomes, the alternative has been the case for buildings with low vitality efficiency. These are primarily outdated buildings which haven’t undergone any main vitality modernisation (Chart 3, panel a).^[8] So, for lending to households the identical sample holds true as for agency loans: households investing in homes with higher local weather efficiency are inclined to revenue from higher credit score situations.

As the BLS outcomes point out, bodily threat of actual property had the biggest internet tightening affect on financial institution lending situations of all of the reported climate-related elements over the previous 12 months (Chart 3, panel b). In internet phrases, the tightening affect of the vitality efficiency of buildings (reflecting the transition threat of buildings) was small, because the tightening affect for some buildings was practically compensated by an easing affect of vitality efficiency for different, extra environmentally pleasant buildings.

Looking forward, primarily based on banks’ expectations, the easing affect of vitality efficiency for buildings with excessive vitality efficiency may outweigh the tightening affect for buildings with low vitality efficiency over the subsequent 12 months. By distinction, the online share of banks anticipating a tightening affect from bodily threat has elevated. Overall, higher vitality efficiency of buildings may proceed to enhance lending situations for housing loans, whereas bodily threat appears to be a priority for a rising share of banks. Also, equally to agency loans, climate-related fiscal assist is predicted to proceed to have a useful affect on financial institution lending situations for housing loans.

Chart 3

Impact of local weather change on credit score requirements for housing loans within the euro space, and driving elements

a) Impact on credit score requirements for housing loans	b) Impact of climate-related elements on financial institution lending situations for housing loans

Climate change additionally influences family demand for credit score. According to the banks surveyed, the funding within the vitality efficiency of buildings has been a key issue driving climate-related housing mortgage demand. BLS outcomes present an elevated mortgage demand over the previous 12 months for buildings with excessive or medium vitality efficiency, that are principally new and comparatively fashionable current buildings (Chart 4, panel a). At the identical time, whereas the European Commission finds that 75% of EU buildings have poor vitality efficiency^[9] and due to this fact require vitality modernisation, banks reported that local weather change truly weighed on mortgage demand on this phase. Looking forward, banks count on a continued dampening affect of local weather dangers on family mortgage demand for buildings with low vitality efficiency, suggesting some scepticism in regards to the progress in vitality modernisation of outdated buildings.

Meanwhile, funding in lowering the bodily threat of actual property – e.g. making buildings resilient towards storms or rising water ranges – had solely a small optimistic affect on housing mortgage demand over the previous 12 months, though banks count on this affect to extend considerably over the subsequent 12 months (Chart 4, panel b). Similarly to enterprise lending, banks think about uncertainty over future climate-related regulation to be an element dampening housing mortgage demand. This could have contributed to suspending modernisation funding in current buildings. Conversely, preferential financial institution lending charges aimed toward enhancing the sustainability of actual property, together with climate-related fiscal assist, had a optimistic affect on housing mortgage demand over the previous 12 months and are anticipated by banks to proceed to contribute positively within the subsequent 12 months.

Chart 4

Impact of local weather change on demand for housing loans within the euro space, and driving elements

a) Impact on housing mortgage demand	b) Impact of climate-related elements on housing mortgage demand

Conclusion

The euro space financial institution lending survey signifies that the local weather efficiency of corporations and the vitality efficiency of buildings matter for banks’ lending situations. Banks have eased credit score requirements for corporations and housing loans for buildings with a greater local weather efficiency and have made progress in managing climate-related dangers.^[10] Climate change additionally fuels mortgage demand by corporations with higher local weather efficiency and people which are making substantial progress within the inexperienced transition, and by households for buildings with excessive and medium vitality efficiency. Meanwhile, larger progress is required for high-emitting corporations and buildings with low vitality efficiency, for which climate-related funding is at the moment delayed.

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