Climate-related disclosure commitment of the lenders, credit rationing, and borrower environmental performance

Iftekhar Hasan, Haekwon Lee, Buhui Qiu and Anthony Saunders

No 7/2023, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: Using lenders becoming members of the Task Force on Climate-Related Financial Disclosures (TCFD) as a plausible exogeneous shock, we examine whether and how lenders' commitment to transparent climate-related disclosures affects borrower firms' environmental performance. We find that client firms of TCFD-member lenders, relative to control firms, significantly improve their environmental performance after the TCFD launch. The effects are stronger for polluting firms. Moreover, TCFD-member lenders influence their borrowers' environmental performance via charging higher loan spread and reducing the number and amount of new loans issued to polluting firms. Finally, polluting clients of TCFD-member lenders experience tightened financial constraints subsequently.

Keywords: Climate-related Disclosure Commitment; Credit Rationing; Borrower Environmental Performance (search for similar items in EconPapers)
JEL-codes: G21 G30 Q54 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-ene and nep-env
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:72023

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