Conference Paper
Climate Risk and Credit Allocation: A Study of Domestic and Foreign Banks in Türkiye
No.
ERF32AC_156
Publisher
ERF
Date
May, 2026
This study examines how banks in Türkiye adjust their lending in response to climate-related risks, with particular attention to ownership structures and home-country characteristics. Using firm-level credit data from the Turkish Credit Registry, we evaluate banks’ exposures to high-carbon (“dirty”) and low-carbon (“green”) sectors across domestic private, state-owned, and foreign institutions. We find a general contraction in lending to dirty sectors, driven primarily by private and foreign banks in the post-Paris Agreement period, while state-owned banks continue to support high-carbon industries. Foreign banks headquartered in advanced economies also reduce dirty-sector lending over time, although the stringency of home-country climate policy does not have a statistically significant effect. These findings indicate that both ownership structures and home-country institutional environments shape banks’ climate-related lending behavior in emerging markets. The paper offers the first systematic evidence from Türkiye on banks’ transition strategies, underscoring sectoral credit reallocation and cross-border influences in climate-aligned banking.
Authors
Yusuf Emre Akgündüz
Executive Director, Central Bank, Republic of Turkiye
Research Fellows
Seyit Mümin Cilasun
Professor of Economics, TED University
Authors
Canan Yildirim
Associate Professor of Finance, Department of Finance...