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ESG and bank loan cost

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  • Liu, Chih-Liang
  • Tsui, Chih-Kai

Abstract

This study examines whether Environmental, Social, and Governance (ESG) performance influences bank lending conditions. Using 2916 firm-loan observations from 2016 to 2023 in Taiwan, we find that superior ESG performance significantly reduces loan interest rates and collateral requirements. Comprehensive ESG scores demonstrate substantial effects on both lending dimensions, with social responsibility proving most influential for interest rate reductions and environmental performance most effective for collateral relief. Exploiting the COVID-19 pandemic as an exogenous shock through difference-in-differences methodology, we provide causal evidence that ESG performance functions as crisis-resilience insurance. High-ESG firms secured considerable interest rate and collateral advantages during the pandemic, with governance quality emerging as the most influential dimension during crisis periods. Our findings advance sustainable finance literature by providing the first comprehensive analysis of ESG effects across multiple lending dimensions simultaneously.

Suggested Citation

  • Liu, Chih-Liang & Tsui, Chih-Kai, 2026. "ESG and bank loan cost," Finance Research Letters, Elsevier, vol. 91(C).
    • Handle: RePEc:eee:finlet:v:91:y:2026:i:c:s1544612325026443
    DOI: 10.1016/j.frl.2025.109395
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