Do sustainable loans deliver? Evidence from the syndicated loan market

We study whether sustainable syndicated loans lead to measurable environmental improvements at the firm level. Using a sample of syndicated loans issued between 2018 and 2022, we track borrowers’ CO2 emissions and environmental outcomes over one-, two-, and three-year horizons after loan issuance. We implement dynamic difference-in-differences (DiD) models and complement baseline estimates with propensity-score matched DiD (PSM-DiD). We also collect deal descriptions for sustainability-linked loans (SLLs) to identify whether contracts disclose measurable environmental KPIs (High Transparency) and test whether SLL effects vary with KPI transparency. We find that green loans are associated with large reductions in CO2 emissions over longer horizons. Average effects for SLLs are weaker, but SLLs with high KPI transparency exhibit stronger improvements in environmental ratings over time.