Analyzing non-performing loan ratio in Egyptian banks: The impact of lending and environmental risks

The present paper investigates the association between the carbon intensity of loans and non-performing loan ratios (NPLR) in Egypt, tapping into an under-researched but important domain in environmental finance. Using an original survey administered to people working in the sector, this study combines responses that measure perceptions of carbon intensity measures, lending risks, and responses to these challenges in the banking sector. By linking these variables with NPLR, the empirical analysis will allow us to estimate direct and indirect effects of carbon-intensive on loans. Preliminary results show that an increase in carbon intensity increases non-performing loan ratios, suggesting that riskier carbon-intensive loans are associated with a higher likelihood of default. This paper adds to the emerging literature on sustainable banking by estimating the financial impact of environmental risks in loan portfolios and suggests that improving green lending behaviour can decrease the risk of future financial crises triggered by the banking sector. Keywords: Carbon Intensity of Loan, Non-Performing Loan Ratio, Lending Risks, Mitigation Measures, Overall Assessment.