Hans Degryse, Roman Goncharenko, Carola Theunisz, Tamas Vadasz
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 being green 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 simple stylized 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.
Link: When Green Meets Green