Green banking illusion? The influence of “Eco-Conscious” bank shareholders on credit allocation

Adrian Böhm, Christian Eufinger, Igor Kadach and Yuki Sakasai

Journal of Corporate Finance, 2025, vol. 92, issue C

Abstract: Can voluntary market-based initiatives effectively promote greener credit allocation? Our paper addresses this question by assessing the role of self-declared environmentally conscious bank shareholders, specifically those endorsing the UN Principles for Responsible Investment, in shaping the sustainability of bank loan portfolios. For our analysis, we utilize a comprehensive dataset that includes information on syndicated loans, firm-level emissions, and both bank and firm ownership and financial data. Controlling for loan demand, at the bank–firm level, we find no evidence of an association between a higher ownership stake by eco-conscious bank shareholders and shifts in banks’ loan allocation strategies between firms with low and high emissions. At the firm-level, we find that lending relationships with banks characterized by greater eco-conscious ownership are not associated with significantly improved environmental performance among borrower firms. Our analysis reveals that banks are treated differently by investors compared to non-financial firms, likely due to regulatory requirements and their unique governance structures, which might explain the observed lack of influence of eco-conscious bank shareholders. Our findings thus indicate the potential limitations of relying on self-declared eco-conscious bank shareholders to guide banks toward environmentally sustainable credit allocation.

Keywords: Green bank lending; Eco-conscious shareholders; Corporate carbon emissions; Corporate carbon intensity; Credit allocation; UN PRI (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 G30 Q50 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:92:y:2025:i:c:s0929119925000355

DOI: 10.1016/j.jcorpfin.2025.102767

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