Author: Lorenzo Esposito
, Giuseppe Mastromatteo & Andrea Molocchi
Summary:
Changing the economy to meet the goals posed by the Paris Agreement implies a financial system aligned to this end. This debate also involves a reconsideration of aims and tools of banking regulation although, for now, the discussion is still not very operational. In a previous work we introduced the -environment-risk weighted assets to internalize the pollution risk of the borrower that here we expand empirically to calculate the -external costs footprint of Italian corporate lending and to cover virtually every part of banks business. Moreover, we analyse whether our proposal is aligned to the European Union taxonomy on environmentally sustainable activities. We show that our framework can help to put on a working track the discussion on banking regulation for sustainable finance.
