In its first economic bulletin of the year the Bank of Spain has disclosed that the most polluting Spanish companies saw their financing reduced between 2014 to 2019 (the last year of analysis) under the Paris Agreement.
In the 'Climate risk and credit supply in Spain' report published this week the bank said that the proportion of financing granted to sectors classified as the most polluting fell from 47% in 2014 to 43% in 2019, before the outbreak of the pandemic.
Loans to the least polluting Spanish sectors grew from 53% in 2014 to 57% in 2019. The report notes that companies in the most polluting sectors are, generally, larger and have worse financial ratios than those of the least polluting sectors.
The Bank of Spain said that the data shows that banks most exposed to climate risk would have reduced the supply of credit to companies operating in the most polluting sectors during this period in order to reduce this risk. The report noted that a bank whose exposure to carbon dioxide emissions is in the 75th percentile would have reduced the supply of credit to polluting companies from 2014 to 2019 by 2,884 euros per year, on average, compared with that to the least polluting companies.
The European Banking Authority (EBA) will oblige financial institutions to assess the degree of environmental sustainability of companies before they can grant loans. In 2022, the EBA published the ESG risk disclosure standards, whereby credit institutions will have to publish comparable information on the risks associated with climate change and the impact on their balance sheet. The information considered includes the 'Green Asset Ratio', which identifies the weight of green assets on the total balance sheet of credit institutions. The aim is to promote greater business respect for the environment, but also to contribute to channelling investment to the most sustainable sectors.