When Green Meets Green

56 Pages Posted: 22 Sep 2021

See all articles by Hans Degryse

Hans Degryse

KU Leuven - Faculty of Business and Economics (FEB)

Roman Goncharenko

KU Leuven

Carola Theunisz

Frankfurt School of Finance and Management; KU Leuven

Tamas Vadasz

KU Leuven - Faculty of Business and Economics (FEB)

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Date Written: September 1, 2021

Abstract

We investigate whether and how the environmental consciousness (greenness for short) of firms and banks is reflected in the pricing of bank credit. Using a large international sample of syndicated loans over the period 2011-2019, we find that firms are indeed rewarded for being green in the form of cheaper loans -- however, only when borrowing from a green consortium of lenders, and only after the ratification of the Paris Agreement in 2015. Thus, we find that environmental attitudes matter "when green meets green." We further construct a simple stylized theoretical model to show that the green-meets-green pattern emerges in equilibrium as the result of third-degree price discrimination with regard to firms' greenness.

Keywords: bank lending, Green Banks, Green Firms, Paris agreement

JEL Classification: A13, G21, Q51, Q58

Suggested Citation

Degryse, Hans and Goncharenko, Roman and Theunisz, Carola and Vadasz, Tamas, When Green Meets Green (September 1, 2021). CEPR Discussion Paper No. DP16536, Available at SSRN: https://ssrn.com/abstract=3928847

Hans Degryse (Contact Author)

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Roman Goncharenko

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Carola Theunisz

Frankfurt School of Finance and Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

KU Leuven ( email )

Naamsestraat 69
Leuven, Vlaams-Brabant 3000
Belgium

Tamas Vadasz

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

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