Template-Type: ReDIF-Paper 1.0

Author-Name: Balint Vargedo
Author-X-Name-First: Balint
Author-X-Name-Last: Vargedo
Author-Email: vargedob@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)

Author-Name: Csaba Burger
Author-X-Name-First: Csaba
Author-X-Name-Last: Burger
Author-Email: burgercs@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)

Author-Name: Donat Kim
Author-X-Name-First: Donat
Author-X-Name-Last: Kim
Author-Email: kimdo@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)



Title: This study evaluates the credit risk of sustainable loans in a preferential capital requirement programme. We utilise loanlevel
data from a uniquely implemented programme from Hungary, applying logistic regressions and survival analysis
techniques. We observe a significantly reduced credit risk for firms with renewable energy and electromobility loans,
even after accounting for all relevant covariates. Models incorporating green characteristics predict a substantially lower
credit risk for firms with green loans compared to models excluding green characteristics. These results are economically
significant and robust to model specifications, alternative definitions of green firms and varying default definitions.
We show that green loans' lower probability of default can justify a reduction of several percentage points in capital
requirements.


Length: 42 pages
Creation-Date: 2025
File-URL: https://www.mnb.hu/en/publications/studies-publications-statistics/working-papers-1-1/wp-2025-2-balint-vargedo-csaba-burger-donat-kim-green-firms-are-less-risky-results-from-a-preferential-capital-requirement-programme-in-emerging-europe
File-Format: Application/pdf
Number: 2025/2
Classification-JEL: E58, G21, G33, O16
Keywords: sustainable finance, financial stability, capital requirement, green finance, default probability, green transition,
central bank mandates.
Handle: RePEc:mnb:wpaper:2025/2