Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
This study examines the impact of carbon risks on green investments in 1501 banks across 106 countries from 2002 to 2023. Building on previous studies examining the effects of carbon risks on financial decisions and portfolio strategies, this study investigates the impact of carbon risk exposure on sustainable lending practices. We find strong evidence that carbon risks are positively associated with banks' green investments. The heterogeneity analysis reveals that carbon risk drives an increase in green investment among banks, regardless of whether their R&D expenditure is high or low. Furthermore, we extend our analysis to five global regions and find that carbon risk significantly boosts green investment among banks. The results are robust to alternative estimation techniques and considering an alternative measure of carbon risk (e.g., Carbon intensity). The outcomes of this study offer unique and new insights for stakeholders and policymakers.