Green versus sustainable loans: The impact on firms’ ESG performance

Özlem Dursun- de Neef, Steven Ongena and Gergana Tsonkova
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Özlem Dursun- de Neef: Goethe University Frankfurt
Gergana Tsonkova: Goethe University Frankfurt

No 22-42, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper studies the development of a firm’s Environmental, Social, and Governance (ESG) performance following the issuance of “green loans” earmarked for green projects versus “sustainable loans” to firms bench-marked by ESG criteria. Firms issuing green loans appear to be effective in shrinking their environmental emissions; however, they weaken in social performance indicated by a decrease in their human rights, community, and product responsibility scores. This implies that they prioritize their environmental goals, yet neglect their commitment towards their clients and society. Sustainable loans, on the other hand, we find to incentivize firms to improve their ESG performance by increasing their environmental and governance scores. Thus, the issuance of a sustainable loan surely precedes (and may consequentially signal) subsequent improvements in a firm’s overall ESG performance.

Keywords: Green Loans; Sustainability Linked Loans; Environmental, Social, and Governance (ESG) Performance; Sustainable Finance (search for similar items in EconPapers)
JEL-codes: G21 G32 M14 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2022-05
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-ene and nep-env
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Citations: View citations in EconPapers (1)

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Working Paper: Green versus sustainable loans: The impact on firms' ESG performance (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp2242

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