How environmental performance affects firms’ access to credit: Evidence from EU countries

In response to climate change and environmental degradation, the European Union has recently proposed a long-term strategy targeting climate-neutral economy by 2050. Sustainable finance plays crucial role in reducing country's production-generated emissions since limited access credit hampers firms from investing pollution abatement technology. Additionally, high collateral requirements may force replace investment with tangible assets, which are often preferred as debt financing. Using survey data ten EU member states, this study investigates impact of firm's performance on bank lending decisions requirements. Our empirical findings suggest that, for sample countries whole, eco-friendly more likely receive line less be imposed For collateralized loans, desirable reduces odds value relative loan size. depend levels economic/financial market development. There seven new states (NMS) our sample. Although financial institutions NMSs reward when they make decisions, consider imposing These hence provide insightful policy implications improving practices sustainable finance.