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Climate-related disclosure commitment of the lenders, credit rationing, and borrower environmental performance

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  • Hasan, Iftekhar
  • Lee, Haekwon
  • Qiu, Buhui
  • Saunders, Anthony

Abstract

Using lenders becoming members of the Task Force on Climate-Related Financial Disclosures (TCFD) as a plausible exogeneous shock, we examine whether and how lenders' commitment to transparent climate-related disclosures affects borrower firms' environmental performance. We find that client firms of TCFD-member lenders, relative to control firms, significantly improve their environmental performance after the TCFD launch. The effects are stronger for polluting firms. Moreover, TCFD-member lenders influence their borrowers' environmental performance via charging higher loan spread and reducing the number and amount of new loans issued to polluting firms. Finally, polluting clients of TCFD-member lenders experience tightened financial constraints subsequently.

Suggested Citation

  • Hasan, Iftekhar & Lee, Haekwon & Qiu, Buhui & Saunders, Anthony, 2023. "Climate-related disclosure commitment of the lenders, credit rationing, and borrower environmental performance," Bank of Finland Research Discussion Papers 7/2023, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:72023
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    More about this item

    Keywords

    Climate-related Disclosure Commitment; Credit Rationing; Borrower Environmental Performance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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