Green loans and bank risk: Navigating the path to sustainable finance

Caterina Di Tommaso, Vincenzo Pacelli and Maria Melania Povia

International Review of Economics & Finance, 2025, vol. 101, issue C

Abstract: This paper investigates the relationship between green loans and the banks' risk as measured by credit default swaps (CDS). We analyze a sample of 308 green loans issued by 47 international banks. We assess the short-term impact of green loans on the CDS spread and the factors affecting the CDS spread of a bank issuing a green loan. We find a “green effect” in issuing a green loan. The banks benefit in terms of reputation. The pattern is confirmed across all regions with specific factors affecting the Cumulative Abnormal Returns (CAR). Green bond characteristics and country-specific features significantly influence CARs, although the effects vary across regions.

Keywords: Green finance; Green loans; Banks; Event study (search for similar items in EconPapers)
JEL-codes: G1 G15 G21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:101:y:2025:i:c:s1059056025003016

DOI: 10.1016/j.iref.2025.104138

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