Abstract: We study credit providers and costs of debt for firms with low ESG performance. First, we find that, while both banks and public bondholders charge low-ESG borrowers a higher interest rate compared to high-ESG borrowers, the premium charged by banks is lower than by bondholders. Second, while bondholders reduce the amount of financing when borrowers' ESG performance deteriorates, banks keep the size of their loans the same or even increase loans issued to low-ESG borrowers. We provide evidence that the difference in creditors' policies is driven by banks' superior information about low-ESG borrowers' ESG materiality and by banks' different preferences regarding their borrowers' ESG performance.
Abstract: We study the environmental sustainability of individuals' consumption choices using unique data from a FinTech App that tracks users' spending and emissions at the transaction level. Using a
randomized encouragement design, we show that individuals are likely to purchase carbon calculator services that provide them with detailed transaction-level information about their emissions. However, such a tool does not cause significant changes in their consumption and emissions. On the other hand, services that offset individuals' emissions by planting trees are less likely to be adopted but prove effective in reducing users' net emissions. Conditioning on age, gender, and income does not alter our findings. Our results show the challenges and opportunities associated with the automated tools promoting sustainable behavior that were initially confined to specialized FinTech Apps and are now becoming widespread across large financial institutions.
