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When Green Meets Green

Author

Listed:
  • Degryse, Hans
  • Goncharenko, Roman
  • Theunisz, Carola
  • Vadasz, Tamas

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 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.

Suggested Citation

  • Degryse, Hans & Goncharenko, Roman & Theunisz, Carola & Vadasz, Tamas, 2021. "When Green Meets Green," CEPR Discussion Papers 16536, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16536
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    Cited by:

    1. Reghezza, Alessio & Altunbas, Yener & Marques-Ibanez, David & Rodriguez d’Acri, Costanza & Spaggiari, Martina, 2022. "Do banks fuel climate change?," Journal of Financial Stability, Elsevier, vol. 62(C).
    2. Bell, Jennifer & Battisti, Giuliana & Guin, Benjamin, 2023. "The greening of lending: Evidence from banks’ pricing of energy efficiency before climate-related regulation," Economics Letters, Elsevier, vol. 230(C).
    3. Jana Jonckheere & Hélène Zimmer, 2020. "Consumer prices in light of the COVID-19 crisis," Economic Review, National Bank of Belgium, issue iv, pages 130-147, december.
    4. Patrick Bisciari & Hervé Godefroid & Wim Melyn & Ruben Schoonackers & Pierrick Stinglhamber & Luc Van Meensel, 2020. "Belgium’s fiscal framework: what is good and what could be better?," Economic Review, National Bank of Belgium, issue iv, pages 64-98, december.
    5. Abiry, Raphael & Ferdinandusse, Marien & Ludwig, Alexander & Nerlich, Carolin, 2022. "Climate change mitigation: How effective is green quantitative easing?," SAFE Working Paper Series 376, Leibniz Institute for Financial Research SAFE.
    6. Koen Burggraeve & Jan De Mulder & Gregory De Walque, 2020. "Fighting global warming with carbon pricing: how it works, field experiments and elements for the Belgian economy," Economic Review, National Bank of Belgium, issue iv, pages 99-130, december.
    7. Javadi, Siamak & Masum, Abdullah-Al, 2021. "The impact of climate change on the cost of bank loans," Journal of Corporate Finance, Elsevier, vol. 69(C).
    8. Ferentinos, Konstantinos & Gibberd, Alex & Guin, Benjamin, 2023. "Stranded houses? The price effect of a minimum energy efficiency standard," Energy Economics, Elsevier, vol. 120(C).
    9. Sarah Cheliout, 2020. "Belgium’s innovative capacity seen through the lens of patent data," Economic Review, National Bank of Belgium, issue iv, pages 25-63, december.
    10. Drudi, Francesco & Moench, Emanuel & Holthausen, Cornelia & Weber, Pierre-François & Ferrucci, Gianluigi & Setzer, Ralph & Adao, Bernardino & Dées, Stéphane & Alogoskoufis, Spyros & Téllez, Mar Delgad, 2021. "Climate change and monetary policy in the euro area," Occasional Paper Series 271, European Central Bank.

    More about this item

    Keywords

    Paris agreement; Green firms; Green banks; Bank lending;
    All these keywords.

    JEL classification:

    • A13 - General Economics and Teaching - - General Economics - - - Relation of Economics to Social Values
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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