Capera Romero, L.M., Artiga Gonzalez, T., Karmaziene, E. and Yuan, X. (2025). Green Gains: The Impact of REITs’ Environmental Performance on Sustainability-Linked Loan Interest Rates Finance Research Letters, 71(January):.
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Affiliated authors
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Publication year2025
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JournalFinance Research Letters
This paper examines the relationship between environmental performance and the use ofsustainability-linked loans (SLLs) by U.S. real estate investment trusts (REITs). We find thata 1% reduction in past carbon emissions increases the REITs' likelihood of taking an SLL by29.6%, while a 1% slower growth in past emissions reduces the interest spread by 1.69 basispoints. Our results reveal that banks reward REITs' previous environmental record throughSLLs, whereas non-SLL interest spreads remain unaffected. These findings underscore theimportance of explicit sustainability-linked financial instruments in incentivizingdecarbonization efforts within the real estate sector.