Published by Global Banking & Finance Review®
Posted on November 10, 2025
2 min readLast updated: January 21, 2026
Add as preferred source on GoogleEuro zone banks offer favorable loan terms to green firms, influenced by ECB's climate risk management strategies. Polluters face stricter conditions.
FRANKFURT (Reuters) -Euro zone banks are offering loans on more favourable terms to companies with a better climate performance and may be punishing polluters, according to a blog post published by the European Central Bank on Monday.
The ECB has been pushing banks for years to disclose and manage their climate risk, using a range of tools like binding supervisory orders, fines and collateral repricing.
The finding is significant as the European economy relies heavily on bank finance for investment, in contrast with the United States, where capital markets are more widely used to generate funding.
"Banks offer a 'climate discount' in their risk assessment to green firms and those in transition," the blog said, analysing responses in the ECB's quarterly Bank Lending Survey. "Also, they seem to charge a 'climate risk premium' for high-emitting firms."
A net 20% of banks surveyed said that they expect to ease credit standards for green firms and 13% plan to do the same for companies in transition. Meanwhile a net 35% said that climate risk would result in tighter lending conditions for high-emitting companies.
Firms facing physical risk from climate change can also expect more expensive financing but transition risk is not expected to have meaningful impact.
A similar trend is happening for mortgages.
High-energy-performance buildings have an increasingly dampening impact on credit standards and banks also see increasing demand to finance such units.
(Reporting by Balazs Koranyi; Editing by Emelia Sithole-Matarise)
Climate risk refers to the potential financial losses or impacts that businesses may face due to climate change and environmental factors, including extreme weather events and regulatory changes aimed at mitigating climate change.
A climate discount is a reduction in loan pricing or interest rates offered by banks to companies that demonstrate strong climate performance or are transitioning to greener practices.
A climate risk premium is an additional charge applied to loans for companies that are high emitters of greenhouse gases, reflecting the increased risk associated with their environmental impact.
The ECB's Bank Lending Survey is a quarterly report that gathers information from banks about their lending practices, credit standards, and demand for loans, providing insights into the financial landscape.
Green firms are companies that prioritize environmentally sustainable practices, often focusing on reducing their carbon footprint and implementing eco-friendly technologies in their operations.
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