ESG Lending

67 Pages Posted: 11 Jun 2021 Last revised: 25 Sep 2022

See all articles by Sehoon Kim

Sehoon Kim

University of Florida - Department of Finance, Insurance and Real Estate

Nitish Kumar

University of Florida

Jongsub Lee

Seoul National University; University of Florida - Warrington College of Business Administration

Junho Oh

Hankuk University of Foreign Studies

Date Written: September 11, 2022

Abstract

The sustainable loan market has flourished amid the widespread issuance of ESG-linked loans with spreads contingent on borrower ESG performance. These loans are issued mostly as revolving credit facilities to large firms with superior ESG profiles by global relationship banks. ESG-linked loans vary widely in the quality of their contractual disclosures, and borrower ESG scores deteriorate after the issuance of low disclosure quality ESG-linked loans. Stock markets respond positively to the announcement of ESG-linked loan issuance only if disclosure quality is high, indicating the importance of transparent disclosure of ESG contingencies in the sustainable lending market.

Keywords: ESG, ESG Loans, ESG Lending, Sustainability-Linked Loans, Sustainable Finance, Bank Lending

JEL Classification: G21, G32, M14

Suggested Citation

Kim, Sehoon and Kumar, Nitish and Lee, Jongsub and Oh, Junho, ESG Lending (September 11, 2022). Proceedings of Paris December 2021 Finance Meeting EUROFIDAI - ESSEC, European Corporate Governance Institute – Finance Working Paper No. 817/2022, Available at SSRN: https://ssrn.com/abstract=3865147 or http://dx.doi.org/10.2139/ssrn.3865147

Sehoon Kim (Contact Author)

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States

Nitish Kumar

University of Florida ( email )

Gainesville, FL 32611
United States

Jongsub Lee

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

University of Florida - Warrington College of Business Administration ( email )

Department of Finance Insurance & Real Estate
P.O. Box 117168
Gainesville, FL 32611-7168
United States
352-273-4966 (Phone)
352-392-0301 (Fax)

Junho Oh

Hankuk University of Foreign Studies

270 Imun-dong Dongdaemun-gu
Seoul, 130-791
Korea, Republic of (South Korea)

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