Corporate Environmental Performance and Financing Costs: A Systematic Review of the Impact on Cost of Debt
DOI:
https://doi.org/10.70142/jbs.v2i01.125Keywords:
Corporate Environmental Performance, Cost of Debt, Sustainable Finance, ESG DisclosureAbstract
This study conducts a qualitative systematic literature review (SLR) to examine the relationship between corporate environmental performance and the cost of debt. Drawing on peer-reviewed studies from accounting, finance, and sustainability literature, the review synthesizes empirical evidence on how environmental performance influences credit risk perception and debt pricing. The findings indicate that firms with stronger environmental performance tend to experience lower cost of debt due to reduced default risk, improved transparency, and enhanced stakeholder confidence. The review also identifies key moderating factors, including ESG disclosure quality, institutional environment, industry sensitivity, and measurement inconsistencies in environmental ratings. Overall, the study confirms that environmental performance is increasingly integrated into credit risk assessment by lenders. However, variations in methodology and ESG measurement limit cross-study comparability. The study contributes to sustainable finance literature by providing an integrated understanding of environmental performance as a determinant of financing costs.
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