Carbon disclosure, emission levels, and the cost of debt

S. Kleimeier, P.M. Viehs

Research output: Working paper / PreprintWorking paper

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In this paper, we investigate the effect of voluntary carbon emissions disclosure on the cost of debt of publicly listed firms. Using a unique and comprehensive database on carbon emissions from CDP (formerly ‘The Carbon Disclosure Project’), we study whether firms which choose to voluntarily disclose their carbon emissions enjoy more favorable lending conditions - in the form of lower spreads on their bank loans - than their non-disclosing counterparts. Our empirical results reveal a significant and negative relation between voluntarily disclosing carbon emission levels and the cost of bank loans for informationally opaque borrowers. Furthermore, we find that higher industry- and firm-size-adjusted carbon emissions have a positive and significant effect on loan spreads. These effects are common to all loans and not limited to loans which have been arranged by norms-constrained lenders suggesting that spread premia are driven by environmental risks rather than investor preferences.
Original languageEnglish
Place of PublicationMaastricht
PublisherMaastricht University, Graduate School of Business and Economics
Publication statusPublished - 1 Jan 2016

Publication series

SeriesGSBE Research Memoranda


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