Does firm carbon risk matter to banks? Evidence from the US syndicated loan market.

Using two measures of firm carbon-risk exposure to capture convergent materiality, we examine whether the syndicated loan market considers borrowers' carbon-risk exposure in loan pricing. We find that carbon intensity does not constitute material information for banks, whereas environmental scores have a statistically significant but incidental economic effect on loan spreads. We also find inconclusive evidence that the market differentiates between firms in high and low environmentally sensitive industries.