Carbon Disclosure, Emission Levels, and the Cost of Debt

42 Pages Posted: 25 Jan 2016 Last revised: 17 Jan 2018

Stefanie Kleimeier

Maastricht University - Department of Finance

Michael Viehs

Oxford University Smith School of Enterprise and the Environment; European Centre for Corporate Engagement (ECCE)

Date Written: January 7, 2018

Abstract

Do banks charge an environmental premium when lending to publicly listed firms? Using CDP’s unique and comprehensive database on carbon emissions, we study whether firms which choose to voluntarily disclose their carbon emissions enjoy more favorable lending conditions than their non-disclosing counterparts. Our empirical results reveal a significant and negative relation between voluntarily disclosure and loan spreads for informationally opaque borrowers. Furthermore, higher carbon emissions have a positive and significant effect on loan spreads. This effect exists for loans arranged by norms-constrained as well as -unconstrained lenders suggesting that spread premia are driven by environmental risks rather than investor preferences.

Keywords: Carbon disclosure, carbon emissions, cost of debt, loan spreads

JEL Classification: A13, G21, Q51

Suggested Citation

Kleimeier, Stefanie and Viehs, Michael, Carbon Disclosure, Emission Levels, and the Cost of Debt (January 7, 2018). Available at SSRN: https://ssrn.com/abstract=2719665 or http://dx.doi.org/10.2139/ssrn.2719665

Stefanie Kleimeier

Maastricht University - Department of Finance ( email )

Maastricht, 6200 MD
Netherlands

Michael Viehs (Contact Author)

Oxford University Smith School of Enterprise and the Environment ( email )

South Parks Road
Oxford, OX1 3QY
United Kingdom
+44-1865-614938 (Phone)

European Centre for Corporate Engagement (ECCE) ( email )

Tongersestraat 53
Maastricht, 6211LM
Netherlands

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