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

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  • Böhm, Adrian
  • Eufinger, Christian
  • Kadach, Igor
  • Sakasai, Yuki

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.

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  • Böhm, Adrian & Eufinger, Christian & Kadach, Igor & Sakasai, Yuki, 2025. "Green banking illusion? The influence of “Eco-Conscious” bank shareholders on credit allocation," Journal of Corporate Finance, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:corfin:v:92:y:2025:i:c:s0929119925000355
    DOI: 10.1016/j.jcorpfin.2025.102767
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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