ESM-Uni.lu Lunch Seminar Professor Steven Ongena, University of Zurich

"Too-big-to-strand? Bond versus bank financing in the transition to a low-carbon economy."

Professor Steven Ongena

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

The seminar will be held in place and online.

This is a joint event with the ESM and the Department of Finance of the University of Luxembourg.