GREEN LOANS AND THE VULNERABILITY OF INDUSTRIES: THE CASE OF GEORGIA

Abstract The article states that "green finance" reflects the connection between environmental aspects and financial solutions and instruments that integrate humanitarian, ecological, technological, socio-political, and cultural issues. The study differentiates risk-based green finance from economic and value-based green finance. It singles out the agricultural sectors, which are most exposed to climate risks and have an exceptionally high contribution to climate change. The study examines how the vulnerability of industries to environmental risks affects lending to these industries by the financial sector. It is based on the heat map methodology and determines lending risks by the dimensions of acute, high-risk, and vulnerable-risk loans. In addition, the concept is taken as a priori, according to which the share of loans should reflect the riskiness of industries, including the environment. The study compares five sectors—energy, agriculture, construction, industry, transport and communication—and the share of loans issued in these sectors in total assets and output. It is established that if the climate impact was not given an essential role in the activities of commercial banks in the financing of the economy, only in agriculture, the climate impact had an indirect influence on the lending decisions of the financial institutions.References: 1. Climate Risk Country Profile Georgia (2021), Washington & Mandaluyong City: World Bank Group and Asian Development Bank, https://reliefweb.int/sites/reliefweb.int/files/resources/climate-risk-country-profile-georgia.pdf 2. Climate-related Risk Radar for Georgian economic sectors and its possible application for the financial sector (2022), The National Bank of Georgia (NBG), German Sparkassenstiftung for International Cooperation (DSIK),. https://nbg.gov.ge/en/page/climate-risk-radar 3. Eckstein, D., Künzel, V., Schäfer, V. 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