September 12, 2025Applied Economics

Corporate carbon risk and loan costs

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Higher carbon risk leads to increased loan costs due to operational risks and liquidity constraints.
Analysis of firms listed on stock exchanges from 2009 to 2021 shows significant correlation with loan costs.
The effect of carbon risk on financing is more pronounced in regions with strict environmental regulations.
Loan costs for high-carbon-risk firms are mainly influenced by government mandates rather than bank decisions.

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This study investigates how corporate carbon risk increases loan costs, suggesting mechanisms linked to profitability and operational risks.

Zhou et al. (2025) studied this question.

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This study investigates how corporate carbon risk increases loan costs, suggesting mechanisms linked to profitability and operational risks.