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Studying how green collateral impacts household financial constraints

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Published on Friday, 22 October 2021

Diane Pierret, Assistant Professor within the Department of Finance at the Faculty of Law, Economics and Finance will join Associate Professor Artashes Karapetyan (ESSEC) as joint coordinators on the “Sustainable intermediation in credit and housing markets” (GREENFINHOME) project. Of the five French-Luxembourgish research projects selected for funding during the FNR INTER-ANR 2021 call, GREENFINHOME was the only finance-based project.

During this project, which will last 2.5 years, the researchers will study the effect of "green" as an attribute of collateral assets on household financial constraints and housing transactions. Households’ financing needs are primarily for durable assets (houses, cars, etc.) that they pledge as collateral in exchange for bank loans. Households have the possibility to choose between green vs. brown durable assets. 

The goal of the project is to understand how the green attribute plays a role in the investment decisions of the buying household, and in bank lending and risk-taking decisions. The project has important policy implications as governments often use subsidies to stimulate investments into green assets. Banking regulation can also foster bank loans backed by green collateral. Through analysing the effect of green collateral on households’ financial constraints, Pierret and Karapetyan plan to learn more about the intended and unintended consequences of these policies on inequalities, financial stability, as well as on their environmental impact.

 The FNR INTER-ANR funding instrument is a joint agreement between the Luxembourg National Research Fund and the French Agence National de la Recherche. The objective of the agreement between the FNR and the Agence Nationale de la Recherche (ANR) is to enhance the cooperation between France and Luxembourg-based scientists in all possible fields of research, and to facilitate the establishment of bilateral research projects. (https://www.fnr.lu/international-cooperation/anr/)