Title: Commercial Banking Lending Decision Involving Environmental Risks: A Case Study
Author(s) : Mary Rodgers, Kathleen Locklear, Richard Skolnik
This case study focuses on a lending decision to a small business involved in the fracking industry. The protagonist, a loan officer at a regional bank, must evaluate a loan request by a fracking equipment rental company. The case study includes a suite of implementation tools, including financial statements for the loan applicant, background information on the fracking industry, a grading rubric and teaching notes. Additionally, the case is designed to include, at the discretion of the instructor, input from guest speakers in the banking industry discussing how they would approach similar situations. Learning objectives include analyzing financial statements for lending decisions, understanding the impact of changing terms of the loan, undertaking an industry analysis to support a lending decision, and recognizing ESG factors' influence on financial decisions. The case study provides students an opportunity to learn how commercial lending decisions can be influenced by climate change concerns held by a larger community of stakeholders besides the narrower group of borrowers, depositors and shareholders.