Italian SMEs and access to credit: Does being “green” matter?

This study explores if Italian MSMEs (Micro, Small, Medium-sized Enterprises) operating in green industries (green MSMEs) are recognized more creditworthy by the banking system than those operating in non-green sectors (non-green MSMEs). In more detail, we explore first if Italian green MSMEs receive more bank credit and have less cost of credit, second if they have a better creditworthiness (in terms of lower probability of default) than non-green ones. We carry out a panel regression with 245,784 observations, of which 7896 refer to green firms and 237,888 to non-green firms over the period 2015–2022. Propensity score matching is also used to check for potential selection bias. Due to the lack of a mandatory green rating, the analysis was not conducted at the level of green enterprises but on “green” industries defined as such based on an assumed particularly high green component. Our results show that Italian green MSMEs pay a higher cost of funding rather than non-green ones and this seems to be, at least partially, justified by a corresponding higher credit risk; differences emerges when the size of enterprises is considered. Public policies should therefore promote the requirement of a green rating based on a rigorous and uniform methodology and provided by an agency that may be promoted by Public Authorities. This would allow for more accurate and objective assessments of the creditworthiness of green companies, improving their access to credit and reducing exposure of banks to credit risk.