Climate-related Disclosure Commitment of the Lenders, Credit Rationing, and Borrower Environmental Performance

56 Pages Posted: 13 Jul 2022 Last revised: 27 Jan 2024

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Haekwon Lee

The University of Sydney

Buhui Qiu

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Anthony Saunders

New York University - Leonard N. Stern School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 27, 2024

Abstract

We examine how lenders’ commitment to transparent climate disclosure affects borrowers’ disclosure behavior and environmental performance by exploiting the establishment of the Task Force on Climate-Related Financial Disclosures (TCFD), initiated by the Financial Stability Board to formulate and implement a globally recognized disclosure framework. We find that client firms of TCFD-member lenders show a higher likelihood of adopting the TCFD framework for climate-related disclosure and experience a significant improvement in environmental performance after the launch of TCFD, compared to control firms. Furthermore, our findings reveal that TCFD-member lenders influence borrowers’ disclosure behavior and environmental performance by charging higher loan spreads and reducing the number and amount of new loans granted to non-TCFD-aligning borrowers. Finally, non-TCFD-aligning borrowers of TCFD-member lenders experience tightened financial constraints. Overall, the collective evidence supports the idea that lenders’ commitment to climate disclosure can play an important role in shaping a transparent disclosure environment and fostering a transition to a green economy.

Keywords: Climate-related Disclosure Commitment, Credit Rationing, Borrower Environmental Performance

JEL Classification: G21, G30, Q54

Suggested Citation

Hasan, Iftekhar and Lee, Haekwon and Qiu, Buhui and Saunders, Anthony, Climate-related Disclosure Commitment of the Lenders, Credit Rationing, and Borrower Environmental Performance (January 27, 2024). Available at SSRN: https://ssrn.com/abstract=4150069 or http://dx.doi.org/10.2139/ssrn.4150069

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Haekwon Lee (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Buhui Qiu

The University of Sydney - Discipline of Finance ( email )

Room 513, The Codrington Building
The University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Anthony Saunders

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
9-190, MEC
New York, NY 10012-1126
United States
212-998-0711 (Phone)
212-995-4220 (Fax)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
380
Abstract Views
1,282
Rank
104,045
PlumX Metrics