N°23-113: Can Lending Hierarchies Balance Bias? The Role of Personal Environmental Values in Credit to Green Firms

We investigate how CEO overconfidence influences banks' decisions to join the United Nations Environment Programme Finance Initiative. Analyzing 13,000 bank-year observations, spanning the last quarter century, with a duration model, we find that overconfident CEOs delay participation by reducing the likelihood of joining by 15% annually. This effect is stronger in large, profitable, deposit-funded banks and persists across various CEO demographics. Our findings reveal how behavioral biases shape strategic decisions, highlighting overconfidence as a barrier to timely sustainability commitments. These insights underscore the importance of leadership traits in driving-or hindering-progress in green finance.