OVERHANG: Debt overhang and green investments - the role of banks in climate-friendly management of emission-intensive fixed assets

Subproject 1: Policy Changes, Lending and Corporate Behavior
 

The collaborative project “Debt Overhang and Green Investments” (OVERHANG) aims to investigate the role of banks in the climate-friendly management of emission-intensive fixed assets. This will identify policy-relevant insights on financial regulation, government-controlled lending and financial stability, as well as raise awareness among indebted stakeholders. Based on the concept of the “underinvestment problem” from corporate finance theory, the impact of bank capital regulation on investment strategies is modeled. Empirical analyses quantify the key mechanisms and identify causal relationships between banks and borrowers. The joint project consists of three subprojects.

• Funded by: Federal Ministry of Education and Research (BMBF)
• Funding period: 2022-2025
• Coordinator: Halle Institute for Economic Research (IWH)
• Project partner: Humboldt-Universität zu Berlin (HU Berlin), Potsdam Institute for Climate Impact Research (PIK) 
• Research group: 
  Financial System Adaptability and Resilience
• Department:
  Financial Markets