No need to worry? Estimating the exposure of the German banking sector to climate-related transition risks

Figures & data

Table 1. Overview of studies estimating the exposure of the financial system to climate-related transition risks.

Study	Geographical	Financial actor	% exposure
	scope
Battiston et al. (2017)	EU	Insurance & Pension Funds	8%
		Banks (loans)	14%
Battiston et al. (2020)	Austria	Banks (loans)	26%
Bellrose, Norman, and Royters (2021)	Australia	Banks	20/25%
BoE-PRA (2015)	World	Equity Markets	6%
		Banks (loans)	0.3%
		Bonds	3%
Faiella and Lavecchia (2020)	Italy	Banks (loans)	9.9/12.9/14.4%${}^{\ast }$
Roncoroni et al. (2021)	Mexico	Investment Funds	3.5%
		Banks (loans)	1%
Ritter (2022)	Hungary	Banks (loans)	61%
Vermeulen et al. (2019)	Netherlands	Pension Funds	8%
		Banks (loans)	13%
		Insurance companies	5%
Weyzig et al. (2014)	EU	Pension Funds	5%
		Banks (loans)	1.4%
		Insurance companies	4%

Source: Authors' elaboration

Notes: ${}^{\ast }$ these values depend on the methodology adopted, as explained in the main text.

Table 2. Data description and sources.

Data	Description	Source
Loan value (LV)	Loan value data (loans, discount credits, mortgage loans) from domestic MFIs to domestic enterprises from 2008−2018.	Quarterly Borrower Statistic (QBS), Deutsche Bundesbank
Bank group	Affiliation for each institute to the following bank groups:	Selected Master Data for MFIs (MaMFI), Deutsche Bundesbank
	BGRS 1) Private Banks
	BGRS 2) Sparkassen and Landesbanken
	BGRS 3) Credit Cooperatives
Size group	Affiliation for each institute to the following size groups based on the yearly average of total asset:	Monthly Balance Sheet Statistics (BISTA), Deutsche Bundesbank
	SZ 1) up to €250 mil.
	SZ 2) more than €250 mil., up to €500 mil.
	SZ 3) more than €500 mil., up to €1 bil.
	SZ 4) more than €1 bil., up to €5 bil.
	SZ 5) more than €5 bil., up to €10 bil.
	SZ 6) more than €10 bil.
GHG data	Total greenhouse gas emissions (CO2 equivalents).	Eurostat
GVA data	Gross value added, chain linked, base year = 2010.	Eurostat

Table 3. NACE Rev. 2 sectors and divisions linked to loan sectors of the QBS.

QBS Code	QBS Description	NACE Rev. 2 sector	NACE Rev. 2 division
110	Agriculture, forestry, fishing and aquaculture	A	01–03
120	Electricity, gas and water supply; refuse disposal, mining and quarrying	B, D, E	05–09; 35; 36–39
130	Manufacturing	C, S	10–33; 95
140	Construction	F	41–43
150	Wholesale and retail trade, repair of motor vehicles and motorcycles	G	45–47
160	Transportation and storage; post and telecommunications	H, N	49–53; 79
184	Hotels and restaurants	I	55–56
185; 182	Information and communication, research and development,	J, M, N, S	58–63; 69–75; 78, 80–82; 94
	membership organizations, publishing activities, other business activities; Holding companies
170, 171	Financial intermediation (excluding MFIs)and insurance companies, Financial lease corporations	K	64–66
181, 183	Housing enterprises; other real estate activities	L	68
186	Health and social work (enterprises and self-employment)	Q	86–88

Notes: There is only aggregated emission data for the NACE Rev. 2 divisions 80–82 on Eurostat. The emission of all division are assigned to QBS sector 185, although the NACE Rev. 2 division 81 is originally part of QBS sector 183. There is only aggregated emission data for the NACE Rev. 2 divisions 74–75 on Eurostat. The emissions of both division are assigned to QBS sector 185, although NACE Rev. 2 division 75 is originally part of QBS sector 186. There is no corresponding NACE Rev. 2 division for the activity Own asset management from QBS sector 185.

Table 4. Number of financial institutes by size (SZ) and bank group (BGRS) at the end of 2018.

SZ	BGRS 1	BGRS 2	BGRS 3	$\sum$
1	53	5	261	319
2	19	21	188	228
3	32	50	156	238
4	77	259	247	583
5	22	48	22	92
6	33	32	20	85
$\sum$	236	415	894	1545

Source: Research Data and Service Centre (RDSC) Deutsche Bundesbank, datasets: BISTA, MaMFI, data period: 01.01.2008-31.12.2018, own elaborations.

Figure 1. GHG emissions and carbon intensities for Germany and EU-28, 2008 level = 100)

Table 5. Emission trends of the 10 highest emitting sectors in Germany in 2018.

NACE Rev. 2 classification	GHG emissions in 2018 (%)	Cumulative change in GHG	Carbon intensity in gCO2e/2018	Cumulative change in
		emissions (%) (2008-2018)		carbon intensity (%) (2008–2018)
D	42	−16.36	4892.3	−35.84
A01	9.69	−3.09	5411.58	58.08
C24	6.63	0.21	2314.45	2.82
C23	5	−11.19	2186.93	−15.83
H51	4.27	0.48	8954.88	68.95
C20	3.88	−25.34	656.24	−30.05
H50	3.56	−18.12	7138.42	99.14
C19	3.12	−6.44	10291.95	161.49
E37-E39	2.54	−26.64	585.8	−52.04
H49	2.37	−5.12	387.06	−10.41
TOTAL	100	−14.34	270.86	−24.21

*As there is no carbon intensity data for (E37–E39), the sector average is displayed.Source: Authors elaboration based on Eurostat (2021a, 2021b). Divisions based on the NACE Rev. 2 classification. See Table 3 for the list of sectors, divisions and codes.

Figure 2. Development of GHG emissions and carbon intensity (in %, aggregated sectors). Source: Authors elaboration based on Eurostat (2021a) and Eurostat (2021b). Sectors based on the NACE Rev. 2 classification.

Figure 3. Development of GHG emissions and carbon intensity (in %, Top 10). Source: Authors elaboration based on Eurostat (2021a, 2021b). Sectors based on the NACE Rev. 2 classification.

Table 6. Loan Carbon Intensity and other core variables computed for the QBS sectors (as of 2018).

(1)	(2)	(3)	(4)	(6)	(7)	(8)	(9)	(10)	(11)
QBS_Code & Description	Loan Value	GHG emissions	Gross Value Added	Carbon Intensity	Loan Carbon Intensity	Rank GHG	Rank CI	Rank LV	Rank AVE
	LV	GHG	GVA	CI	LCI
110 - Agriculture	52.76	70476.63	15.96	4415.77	1335.83	4	1	10	7
120 - Energy, water, waste	118.82	327576.94	99.76	3283.75	2756.82	1	2	5	3
130 - Manufacturing	143.41	175,884.59	618.72	284.27	1226.41	2	4	3	2.5
140 - Construction	72.41	10,097.69	107.22	94.18	139.45	6	5	8	7
150 - Wholesale	140.26	16,834.64	277.32	60.7	120.02	5	7	4	4.5
160 - Transportation	52.93	89,609	120.45	743.96	1693.08	3	3	9	6
170 - Financials	153.84	1557.43	111.86	13.92	10.12	10	10	2	6
181, 183 - Housing enterprises	396.65	379.31	281.31	1.35	0.96	11	11	1	6
184 - Hospitality	25.14	3188.02	39.56	80.59	126.79	9	6	11	10
185 - Info & Comm.	112.79	7801.63	425.44	18.34	69.17	7	9	6	6.5
186 - Health & Social	82.08	6562.87	187.07	35.08	79.96	8	8	7	7.5

Source: Research Data and Service Centre (RDSC) Deutsche Bundesbank, dataset: QBS, data period: 01.01.2008-31.12.2018, own elaborations. Note: Loan values and GVA are displayed in billion €. GHG emissions are displayed in Tsd. Tonnes.

Figure 4. Share of loans and LCI (left panel) and Share of loans and GHG emissions (right panel). Source: Research Data and Service Centre (RDSC) Deutsche Bundesbank, dataset: QBS, data period: 01.01.2008–31.12.2018, own elaborations.

Figure 5. Changes (in %) of the main variables under scrutiny over the period 2008–2018. Source: Research Data and Service Centre (RDSC) Deutsche Bundesbank, dataset: QBS, data period: 01.01.2008–31.12.2018, own elaborations.

Figure 6. The German financial system. Source: Authors' elaboration.

Figure 7. Distribution of loans to QBS sectors per size group as of 2008 and 2018. Source: Research Data and Service Centre (RDSC) Deutsche Bundesbank, datasets: BISTA, QBS, data period: 01.01.2008–31.12.2018, own elaborations.

Figure 8. Distribution of loans to QBS sectors per bank group as of 2008 and 2018. Source: Research Data and Service Centre (RDSC) Deutsche Bundesbank, datasets: MaMFI, QBS, data period: 01.01.2008–31.12.2018, own elaborations.

Table 7. Distribution of loan exposure to CPRS sectors for different size and bank groups in % as of 2018.

SZ	BGRS 1	BGRS 2	BGRS 3	Mean by size
1	22.22	40.23	24.89	24.95
2	19.60	25.95	24.63	24.54
3	28.12	26.84	23.76	24.89
4	25.81	25.94	23.88	25.16
5	26.13	22.85	13.78	21.31
6	27.22	24.96	26.03	26.09
Mean by group	26.98	24.93	23.58	25.17

*Averages are value-weighted.

Source: Research Data and Service Centre (RDSC) Deutsche Bundesbank, datasets: BISTA, MaMFI, QBS, data period: 01.01.2008–31.12.2018, own elaborations.

Notes: BGRS indicates the category of bank (list abriged by the Bundesbank RDSC). BGRS 1 = Big banks, regional and other commercial banks, private bankers, branches of foreign banks; BGRS 2 = Landesbanken, Sparkassen, and Building and loan associations; BGRS 3 = Credit cooperatives, and Regional institutions of credit cooperatives, banks with special,development and other central support tasks

Table 8. Quantification of transition risks of the German banking system according to alternative methods.

Method	Sector	Outstanding Loan	Share of Loan	Affected Size Group	Affected Bank Group
		Volume in bn.	Volume in bn.
CCrS	Total	262.23	19.41%
	Energy, water, waste	118.82	8.79%	Large Banks (Group 6)	All
	Manufacturing	143.41	10.61%	All	Private Banks (Group 1)
LCI (above median)	Total	440.33	32.59%
	Transportation	52.93	3.92%	Large Banks (Group 6)	Private Banks (Group 1)
	Energy, water, waste	118.82	8.79%	Large Banks (Group 6)	All
	Agriculture	52.76	3.90%	Small Banks (Group 1 & 2)	Credit Cooperatives (Group 3)
	Manufacturing	143.41	10.61%	All	Private Banks (Group 1)
	Construction	72.41	5.36%	Small & Mid-size Banks (Group 1–4)	Sparkassen & Landesbanken (Group 2)
CPRS	Total	340.07	25.17%	Large Banks (Group 6)	Private Banks (Group 1)

Source: Research Data and Service Centre (RDSC) Deutsche Bundesbank, datasets: BISTA, MaMFI, QBS, data period: 01.01.2008–31.12.2018, own elaborations.

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