Lending Relationships of Firms for a Just Transition

Creative Commons License

Saharti M., Saeed A., Chaudhry S. M., NASİR M. A.

European Financial Management, vol.31, no.3, pp.1195-1216, 2025 (SSCI, Scopus) identifier

  • Publication Type: Article / Article
  • Volume: 31 Issue: 3
  • Publication Date: 2025
  • Doi Number: 10.1111/eufm.12535
  • Journal Name: European Financial Management
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, International Bibliography of Social Sciences, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit, vLex
  • Page Numbers: pp.1195-1216
  • Keywords: ESG, financing arrangement, interest rate, just transition, sustainability
  • Open Archive Collection: Article
  • Azerbaijan State University of Economics (UNEC) Affiliated: Yes

Abstract

This paper examines lending dynamics for firms aiming for a “just transition”. Analyzing 37,426 firm-year observations from DealScan and Refinitiv's environmental, social and governance (ESG) transition data (2002–2021), we find that lenders offer lower interest rates to firms with prior relationships and strong ESG commitments, particularly environmental ones. While environmental factors receive favourable treatment, economic and governance transitions are less prioritized. Lenders tend to form more dispersed syndicates when supporting firms focused on ESG transitions, especially environmental ones. This research highlights the uneven focus within ESG transitions and emphasizes the underexamined area of governance, providing insights into lending relationships.