The European Central Bank published research based on the euro area bank lending survey showing that banks are factoring firms’ climate performance and buildings’ energy performance into lending policies and observed loan demand. Better climate performance is associated with eased credit standards and more favourable terms, while higher climate risks are linked to tighter conditions, and green investment needs are increasing demand for credit. For corporate lending, banks reported an easing impact from climate risk and climate-related measures on credit standards for green firms and firms in transition, while reporting a tightening impact for high-emitting firms. In the July 2025 survey round, a net 20% of banks reported an easing impact on credit standards for green firms and 13% for firms in transition over the past 12 months, versus a net 35% reporting a tightening impact for high-emitting firms. Over 2023-25, both transition risk and physical risk were reported as tightening factors for firms, with banks expecting physical risk to have a net tightening effect over the next 12 months (18% expecting tightening versus 8% easing) and a broadly neutral net impact from transition risk (16% tightening and 16% easing). On the demand side, banks linked climate change to stronger loan demand from green and transitioning firms, mainly for fixed investment, while a net 11% cited uncertainty about future climate regulation as a factor dampening firms’ loan demand. For housing loans, higher energy performance of buildings was associated with eased credit standards, while low energy performance was associated with tightening, and physical risk of real estate was reported as the largest net tightening climate-related factor over the past 12 months. Banks also reported increased housing loan demand for buildings with high or medium energy performance, but a dampening impact on demand for low-energy-performance buildings; preferential lending rates aimed at improving sustainability and climate-related fiscal support supported demand, while uncertainty about future climate-related regulation weighed on it and is expected to continue doing so.
European Central Bank 2025-11-10
European Central Bank bank lending survey finds climate performance eases credit for green firms and energy-efficient buildings but tightens for high emitters
The European Central Bank's research shows euro area banks are integrating climate and energy performance into lending policies, affecting credit standards and loan demand. Banks eased credit standards for green firms and those in transition, while tightening conditions for high-emitting firms. In housing loans, higher energy performance led to eased credit standards and increased demand, whereas low energy performance and physical risks resulted in tightening conditions.