EUROPEAN CENTRAL BANKEUROSYSTEMWorking Paper SeriesParinitha (Pari)Sastry,Emil Vemer,Business as usual:David Marques-lbanezbank climate commitments,lending,and engagementN02921Disclaimer:This paper should not be reported as representing the views of the European Central Bank(ECB).The views expressed are those of the authors and do not necessarily reflect those of the ECB.AbstractThis paper studies the impact of voluntary climate commitments by banks on theirlending activity.We use administrative data on the universe of bank lending from19 European countries.There is strong selection into commitments,with increasedparticipation by the largest banks and banks with the most pre-existing exposureto high-polluting industries.Setting a commitment leads to a boost in a lender'sESG rating.Lenders reduce credit in sectors they have targeted as high priorityfor decarbonization.However,climate-aligned banks do not change their lendingor loan pricing differentially compared to banks without climate commitments,suggesting they are not actively divesting.We can reject that climate-alignedlenders divest from firms in targeted sectors by more than 2.6%.Firm borrowersare no more likely to set climate targets after their lender sets a climate target,which casts doubt on active engagement by lenders.These results call into questionthe efficacy of voluntary commitments.Keywords:Banks,Green Lending,Voluntary targetsJEL Codes:Q50,G21ECB Working Paper Series No 2921