Systemic and climate risks in the banking sector: evidences from syndicated lending and net-zero commitments

Sina, A. (2026) Systemic and climate risks in the banking sector: evidences from syndicated lending and net-zero commitments. doi: 10.48683/1926.00128512 (Unpublished)

Abstract/Summary

This thesis investigates systemic risk and climate risk as distinct yet interconnected sources of financial vulnerability in the banking sector. Chapter 1 outlines the thesis contributions and overall structure. Chapter 2 reviews the relevant literature. Chapter 3 examines syndicated leveraged and covenant-lite loans as potential channels of systemic risk. We show that while these loans are not inherently systemic, banks with large exposures become more vulnerable during recessions, and pipeline risk can rise when market conditions hinder loan sales. Furthermore, although the banking network has historically become less interconnected due to the participation of smaller institutions, the centrality of large banks amplifies the risk of contagion. These findings suggest that regulators should closely monitor the exposure of highly central banks to such loans. Chapter 4 examines how climate factors influence systemic stability in the U.S. syndicated loan market. Using climate risk measures, green lending orientation, and regional indicators, we identify four key drivers of systemic risk: banks’ environmental stance, extreme events in the South, precipitation anomalies in the East, and changes in U.S. climate policy. While exposure to climate-sensitive regions increases vulnerability, green lending appears to enhance stability. These findings underscore the importance of climate policies that reduce uncertainty and support sustainable lending. Chapter 5 uses data on Net-Zero Banking Alliance (NZBA) members to show that banks making progress toward decarbonization targets exhibit lower climate risk, as measured by CRISK. However, between late 2024 and early 2025, several large North American and Japanese banks withdrew from the NZBA. Evidence points to U.S. electoral outcomes, rather than financial or institutional factors, as the main driver of these exits. This highlights the vulnerability of climate coalitions to political shifts, raises doubts about the feasibility of the 2050 net-zero goal, and emphasizes the need to strengthen the Alliance’s resilience across different political contexts.

Item Type	Article
URI	https://centaur.reading.ac.uk/id/eprint/128512
Identification Number/DOI	10.48683/1926.00128512
Divisions	Henley Business School
Date on Title Page	September 2025
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