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The impact of climate litigation risk on firms’ cost of bank loans

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  • Beyer, Andreas
  • Nobile, Lorenzo

Abstract

Using a novel worldwide dataset of 5,264 syndicated loans issued to 329 firms from 2006 to 2021, we study how climate-related litigation risk affects firm’s cost of borrowing. We find robust empirical evidence that firms targeted by climate lawsuits pay significantly higher spreads on their bank loans. These effects are more pronounced for firms with weaker environmental performance and higher ESG controversies. The results suggest that lender’s view climate litigation as a material risk factor, which is increasingly priced into debt contracts. JEL Classification: G21, G32, Q56, K32

Suggested Citation

  • Beyer, Andreas & Nobile, Lorenzo, 2025. "The impact of climate litigation risk on firms’ cost of bank loans," Working Paper Series 3087, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20253087
    Note: 336354
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    References listed on IDEAS

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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
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law

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