European Financial Management· 2026Q1
Green Versus Sustainable Loans: The Impact on Firms' ESG Performance
- 37citations
- Q1SCImago
- 2026year
Short summary
Firms issuing green loans improve environmental performance (e.g., reduced emissions) but see social performance decline, while sustainable loans lead to broader ESG gains without significant social trade-offs.
AI-generated from the title and abstract; the full text is not read.
Key points
- Green loans improve environmental performance, particularly emission reduction.
- Green loans are associated with a decline in firms' social performance.
- Sustainable loans enhance both environmental and governance outcomes.
- Sustainable loans do not show a comparable decline in social performance as green loans.
- Loan design dictates corporate sustainability behavior, with green loans offering targeted environmental gains and sustainable loans fostering holistic ESG improvements.
AI-generated from the title and abstract; the full text is not read.
Abstract
ABSTRACT This paper studies the development of a firm's Environmental, Social, and Governance (ESG) performance following the issuance of “green loans” earmarked for green projects versus “sustainable loans” benchmarked by ESG criteria. Firms issuing green loans improve environmental performance, particularly by reducing emissions, but experience declines in social performance, suggesting a trade‐off between environmental and social objectives. In contrast, sustainable loans are associated with broader ESG improvements, enhancing environmental and governance outcomes without a comparable social decline. Overall, loan design shapes corporate sustainability behaviour: green loans generate targeted environmental gains, whereas sustainable loans foster more balanced and holistic ESG performance improvements.
The authors' abstract, as published at the source. European Financial Management, 2026 · DOI ↗
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Field: Finance
FinanceEconomics, Econometrics and Finance