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Biodiversity risks and lender credit allocation: The role of lenders’ commitments to environmental sustainability

Asgharian, Hossein LU ; Hajimirza, Najmeh LU ; Jonsson, Sara and Liu, Lu (2025)
Abstract
This paper investigates how voluntary sustainability commitments shape lenders’ integration of biodiversity risks into credit allocation, comparing UNEP FI–committed and non-committed lenders. Using global syndicated loan data (2018–2023) matched with firm-level measures of biodiversity impact and dependency, we find that all lenders extend smaller loans to more biodiversity-dependent firms. consistent with dependency being broadly perceived as financially material. By contrast, only committed lenders respond to biodiversity impact risk by reducing credit to high-impact borrowers—and only after signing the commitment, ruling out pre-existing “greener” preferences. Neither committed nor non-committed lenders adjust secondary-market loan... (More)
This paper investigates how voluntary sustainability commitments shape lenders’ integration of biodiversity risks into credit allocation, comparing UNEP FI–committed and non-committed lenders. Using global syndicated loan data (2018–2023) matched with firm-level measures of biodiversity impact and dependency, we find that all lenders extend smaller loans to more biodiversity-dependent firms. consistent with dependency being broadly perceived as financially material. By contrast, only committed lenders respond to biodiversity impact risk by reducing credit to high-impact borrowers—and only after signing the commitment, ruling out pre-existing “greener” preferences. Neither committed nor non-committed lenders adjust secondary-market loan sales in response to biodiversity risks. These asymmetric findings suggest that environmental commitments primarily shape ex ante screening rather than ex post portfolio management, and that committed lenders internalize double materiality while non-committed lenders focus exclusively on financial materiality. (Less)
Please use this url to cite or link to this publication:
author
; ; and
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
Biodiversity risk, Bank lending, Credit supply, Secondary market, Sustainability commitments, G21, G32,, G38, Q57
pages
41 pages
publisher
SSRN
project
Knut Wicksell Centre for Financial Studies
language
English
LU publication?
yes
id
e1e9498c-e67e-44bc-82ab-df80a836e4bd
alternative location
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5759722
date added to LUP
2026-06-02 10:55:19
date last changed
2026-06-02 15:36:21
@misc{e1e9498c-e67e-44bc-82ab-df80a836e4bd,
  abstract     = {{This paper investigates how voluntary sustainability commitments shape lenders’ integration of biodiversity risks into credit allocation, comparing UNEP FI–committed and non-committed lenders. Using global syndicated loan data (2018–2023) matched with firm-level measures of biodiversity impact and dependency, we find that all lenders extend smaller loans to more biodiversity-dependent firms. consistent with dependency being broadly perceived as financially material. By contrast, only committed lenders respond to biodiversity impact risk by reducing credit to high-impact borrowers—and only after signing the commitment, ruling out pre-existing “greener” preferences. Neither committed nor non-committed lenders adjust secondary-market loan sales in response to biodiversity risks. These asymmetric findings suggest that environmental commitments primarily shape ex ante screening rather than ex post portfolio management, and that committed lenders internalize double materiality while non-committed lenders focus exclusively on financial materiality.}},
  author       = {{Asgharian, Hossein and Hajimirza, Najmeh and Jonsson, Sara and Liu, Lu}},
  keywords     = {{Biodiversity risk; Bank lending; Credit supply; Secondary market; Sustainability commitments; G21; G32,; G38; Q57}},
  language     = {{eng}},
  month        = {{11}},
  note         = {{Preprint}},
  publisher    = {{SSRN}},
  title        = {{Biodiversity risks and lender credit allocation: The role of lenders’ commitments to environmental sustainability}},
  url          = {{https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5759722}},
  year         = {{2025}},
}