The financial footprint: how banking activities in the world shape carbon emissions?

Purpose Despite the growing body of literature on climate change and finance, there remains a notable gap in research exploring how banks’ operational structures influence carbon dioxide emissions. This paper aims to address this gap by investigating the relationship between banks’ operational activities and CO2 emissions across 110 countries. Design/methodology/approach This study uses a cross-country analysis to examine how various aspects of banks’ operations – such as loans to governments and corporate entities, corporate-based deposits, noninterest income and retail deposits from individual customers – impact emissions. The analysis also incorporates a robust control mechanism to account for potential confounding factors. Findings The findings indicate that loans extended by banks to governments and corporations, along with corporate-based deposits, tend to increase carbon emissions. In contrast, income derived from noninterest sources and retail deposits from individual customers exert a downward pressure on emissions. The coefficients associated with bank operations are found to be more significant than those linked to renewable energy initiatives. Originality/value This paper contributes to the literature by examining the influence of banks’ operational structures on carbon dioxide emissions, a topic that has been underexplored.