Mardi | 2021-11-23
16h – B103

What is the role market- and bank-based debt play in the climate transition process? We presentevidence that bond markets price the risk that assets held by fossil fuel firms strand, while banks inthe syndicated loan market seemingly do not price this risk much. Consequently, to fulfill theirfinancing needs fossil fuel firms increasingly rely less on bonds and more on loans. We caninterpret the within-firm bond-to-loan substitution along stranding risk as a contraction in the supplyof bond versus bank funding. Within the banking sector especially the big banks are willing toprovide cheaper and more financing to fossil fuel firms.