Economic efficiency of green debt financing

The transition to carbon neutrality is relevant for almost all countries in the world. Most of funding for this transition is coming from shareholders of the respective enterprises, venture capital firms, and the state. A significant portion of the funds is provided through debt financing by banks and capital markets. The article examines in detail the features of bank lending to projects that help reduce the negative impact on the environment. The authors prove the indispensable role of credit institutions in this activity, the main effect of participation in «green» projects for which is not provided by a direct benefit from the marginality of their lending. The measures to improve credit analysis shown in the article lead to a more adequate assessment of the risks of environmentally friendly projects, that helps to reduce the reserves for such loans. The parallel offer of new non-credit «green» products collectively enhances the bank’s reputation, that attracts new customers and strengthens the affection of existing ones, for whom it is important to follow the principles of sustainable development in their consumption model and, above all, to encourage those producers of goods and services who try to improve their environment to a greater extent than others do. As a result, the income and profit of the bank increase.

Keywords: risk, carbon intensity of the project, green credit, financial efficiency, credit analysis.

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