Green Loans and Firm Performance: Evidence on Signalling and Impact Investing Effects

Green loans, costlier than sustainable bonds, are mainly used by smaller firms. This study examines 439 green loans issued to 299 nonfinancial firms during 2016–2023, assessing whether they signal environmental commitment or generate impact. Findings support both Signalling and Impact Investing theories. Share prices show abnormal returns around announcements, especially for subsequent loans. Post‐loan, firms see a 1.1%–1.2% rise in operating income relative to assets and a 0.11–0.13 kg CO 2 reduction per $1000 revenue. Loan size has limited impact, while loan conditions matter more. Green loans offer both financial and environmental benefits, reinforcing their role in sustainable development.