DP16536 When Green Meets Green
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.