Renewable energy, credit portfolios and intermediation spread: Evidence from the banking sector in BRICS

Using renewable energy sources and substituting fossil fuels is imperative to promote ecological wellbeing and achieve a net-zero carbon ecosystem. This also requires the support of financial intermediaries who would look for incentives to expedite clean financing. This study assesses if there are benefits for the banking firms while they lend to the firms that engage in renewable sources. The research employs an exhaustive data set of banks in BRICS between 2011 and 2021 and evaluates the impact of renewable lending on banking performance. The results demonstrate that an increase in renewable lending improves the spread, and the results remained robust after controlling for exogenous variables and various proxies of performance. The findings imply that there are clear incentives for the banks that can help achieve the sustainability goals. There are important fiscal impli-cations for regulators and central banks regarding credit risk and capital charges.