Climate trailblazer or opportunistic profiteer: The role of bank branches as a channel for funding green renovation
Title: Climate trailblazer or opportunistic profiteer: The role of bank branches as a channel for funding green renovation
Abstract: Drawing on the growing academic literature on bank advice to retail customers and on climate finance this study assesses the role that bank advice plays in facilitating green lending to households. Costly photovoltaic systems, an example for green renovation, are often financed by households through bank loans originated at a local bank branch. We establish a significant positive relation between local bank presence, an instrument for the resulting availability of credit advice, and the build-up of residential photovoltaic systems. However, this relation varies across the different types of banks and is particularly pronounced for locally rooted banks with a mandate to promote the regional economy. To make this distinction, we leverage the idiosyncrasies of the German banking market. Furthermore, we establish that for certain banks local presence is associated with substituting rather than complementing government subsidies to households for renovation purposes. Our results highlight the impact of the banking system on sustainable economic development as well as the importance of bank advice availability to households in this context. As the number of bank branches continues to decline, we expect the cross-channel for lending and hence the green economic transition to diminish for households if no alternatives are provided.