Lending for Sustainability

Abstract

This thesis aims to investigate the relationship between shareholder wealth and sustainable loans, which are new instruments to nance ESG-friendly activities in the context of a growing public consciousness about sustainability. Using short-term event study methodology, we observe a signi cantly negative market reaction to sustainable loan issuance announcements from 2017 to 2020, suggesting that equity investors perceive that the costs of sustainable loan issuance outweigh any bene ts. The price decline is larger for borrowers after the market crash caused by the COVID-19 pandemic, while the decline is smaller when public attention towards sustainability increases. However, we nd that buy-and-hold abnormal returns measured against a portfolio of control rms do not di er signi cantly from zero in an up-to-six-month basis following issuance, suggesting no signi cant e ect of sustainable loan issuance on shareholder wealth in the long run. Keywords: ESG, sustainable lending, sustainable nance, sustainable loans, shareholder wealth, event study, buy-and-hold abnormal return