Working Paper: CEPR ID: DP16536
Authors: Hans Degryse; Roman Goncharenko; Carola Theunisz; Tamas Vadasz
Abstract: We investigate whether and how the environmental consciousness (greenness for short) of firms and banks is reflected in the pricing of bank credit. Using a large international sample of syndicated loans over the period 2011-2019, we find that firms are indeed rewarded for beinggreen in the form of cheaper loans -- however, only when borrowing from a green consortium of lenders, and only after the ratification of the Paris Agreement in 2015. Thus, we find that environmental attitudes matter "when green meets green." We further construct a simplestylized theoretical model to show that the green-meets-green pattern emerges in equilibrium as the result of third-degree price discrimination with regard to firms' greenness.
Keywords: Paris Agreement; Green Firms; Green Banks; Bank Lending
JEL Codes: A13; G21; Q51; Q58
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Firms' environmental consciousness (Q52) | Loan pricing (G13) |
| Green firms (Q52) | Cheaper loans from green banks (G21) |
| Paris Agreement ratification (F53) | Relationship between firms' greenness and loan pricing (G32) |
| Green meets green (GMG) effect (F64) | Discounts from green banks (G21) |
| Environmental attitudes (Q56) | Loan pricing (G13) |