ESG Lending

Kim, Sehoon; Kumar, Nitish; Lee, Jong-Sub; Oh, Junho

doi:10.2139/ssrn.3865147

Cited by 20 publications

(84 citation statements)

References 53 publications

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“…Du and Yu (2021) find that more readable CSR reports may indicate better future CSR performance. Similarly, Kim et al (2022) find that borrowers with low disclosure quality in contractual details of environmental, social and governance (ESG)-linked loans experience deterioration in future ESG performance. Conversely, borrowers with high disclosure quality continue to maintain good ESG profiles.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Corporate social responsibility report readability, credit ratings and cost of borrowing

Garg²

2022

RAF

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Purpose This study aims to investigate how credit rating agencies and banks, important credit market participants, incorporate corporate social responsibility (CSR)-related information in their assessment of firm’s creditworthiness. Design/methodology/approach The authors collect stand-alone CSR reports published by Fortune 500 companies from 2002 to 2014 and use file size as a readability measure to investigate the impact of stand-alone CSR reports’ readability on firms’ credit ratings and cost of borrowing. Findings The authors find that firms with higher CSR report readability enjoy higher credit ratings and lower costs of bank loans, suggesting that rating agencies and banks perceive lower default risk for firms with more readable CSR reports. Further analysis indicates that the positive association between CSR report readability and credit ratings is more pronounced for firms with high CSR performance. Conversely, the negative association between CSR report readability and bank loan spreads is more pronounced for firms with low CSR performance and credit quality, suggesting complementary roles of rating agencies and banks in their use of CSR reports. Originality/value Overall, the results highlight the importance of improving the textual characteristics of CSR reports, especially readability, in reducing information risk in the credit market.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Corporate social responsibility report readability, credit ratings and cost of borrowing

Garg²

2022

RAF

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“…For instance, in Germany, as part of the programme Climate action campaign for SMEs, loans with low interest of up to EUR 25 million are offered. Depending on the purpose of the loan, the SME has to provide documents, such as a carbon footprint assessment or an assessment plan certification (KFW, 2020 [137]).…”

Section: Direct Financingmentioning

confidence: 99%

“…In Germany the Climate Action campaign for SMEs, comprise a climate grant that is paid directly to the company, which is set at up to 6% of the loan amount. The "up to" indicates that state aid legislation may be relevant in determining the actual grant amount (KFW, 2020 [137]).…”

Section: Loan For Successful Esg Management' Product Flow Diagrammentioning

confidence: 99%

Financing SMEs for sustainability

2022

OECD SME and Entrepreneurship Papers

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“…While much of the literature so far has focused on the equity and bond side, i.e. the public capital market perspective, of this development (Kim et al (2021), Flammer (2021)), very little is known about the growing role of sustainability-linked loans (SLLs), i.e. the bank lending side.…”

Section: Introductionmentioning

confidence: 99%

“…the bank lending side. * Even within the narrower group of sustainable finance debt instruments, SLLs are truly distinct: In contrast to green bonds, social bonds and green loans, whose proceeds have to be used to finance environmentally-or socially-friendly projects, SLLs are general corporate purpose loans (Kim et al 2021). The issuance of SLLs is therefore not characterized by the use of proceeds.…”

Section: Introductionmentioning

confidence: 99%