Discussion Paper Details

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Title: When Green Meets Green

Author(s): Hans Degryse, Roman Goncharenko, Carola Theunisz and Tamas Vadasz

Publication Date: September 2021

Keyword(s): bank lending, Green Banks, Green Firms and Paris agreement

Programme Area(s): Financial Economics

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.

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Bibliographic Reference

Degryse, H, Goncharenko, R, Theunisz, C and Vadasz, T. 2021. 'When Green Meets Green'. London, Centre for Economic Policy Research.