Title page

Contents

Abstract 3

Non-technical summary 4

1. Introduction 6

2. Hypotheses 10

2.1. The effect of regulatory risks on banks' lending 10

2.2. The role of banks' exposure 11

3. The Paris Agreement 12

4. Data and summary statistics 13

4.1. Data and measurement 13

4.2. Descriptive statistics 18

5. Identification 19

5.1. Empirical specification 19

5.2. Parallel trends 21

6. Results 22

6.1. The effect of regulatory risks on banks' lending 22

6.2. The role of banks' exposure 25

6.3. Does bank behavior fuel or hinder the transition? 26

6.4. What is driving banks' behavior? 28

7. Robustness checks 31

7.1. Robustness on the effect of regulatory risks on banks' lending 31

7.2. Robustness on the role of banks' exposure 34

8. Conclusion 35

References 37

Appendix 56

Acknowledgements 63

Table 1. Variable definitions 43

Table 2. Summary statistics 44

Table 3. Industry distribution of firms' exposure 45

Table 4. Parallel trends 46

Table 5. Parallel trends: Negatively exposed vs. non-negatively exposed banks 47

Table 6. The effect of regulatory risks on lending: Regional differences 48

Table 7. Impact of Trump's election and withdrawal announcement in the United States 49

Table 8. Loan and firm controls 50

Table 9. The differential role of banks' own exposure 51

Table 10. Does banks' behavior fuel or hinder the transition? 52

Table 11. The drivers of banks' behavior 53

Figure 1. The distribution of firms' and banks' exposure 54

Figure 2. The distribution of banks' exposure before and after the Paris Agreement 55

Table A1. Alternative exposure measures + control group 57

Table A2. Fixed effects cascades 58

Table A3. Timing and location of regulation, anticipation effects and greenwashing 59

Table A4. Bank: Alternative exposure measures 60

Table A5. Bank: Anticipation effects and securitization 61

Figure A1. Placebo tests 62