Measurement and effects of bank exit policies

We study whether exit policies by financial institutions have financial and real consequences on the firms they target, using bank coal exit policies as a laboratory. In contrast to theories assuming high capital substitutability, we find large effects of these policies. Bank exit policies negatively affect both the financing and operation of coal assets. Substitution to other sources and providers of capital appears to be limited. Coal power plants owned by firms exposed to exit policies are more likely to retire, translating into lower CO2 emissions. Exit policies have reduced CO2e emissions from energy production by an estimated 0.62 gigaton.