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The blue and green firms are notable contributors to sustainable development. Similar to other businesses in circular economies, blue and green firms also face financing constraints. This paper aims to assess whether blue and green lending help in optimizing the interest rate spreads and the likelihood of default.

This analysis is based on an unbalanced panel of banks from 20 eurozone countries for eleven years between 2012 and 2022. The key indicators of banking include interest rate spread and a market-based probability of default. The paper assesses how these indicators are influenced by exposure to green and blue firms after controlling for several exogenous factors.

The results show a positive relationship between green and blue lending and spread, while there is a negative link with the probability of default. This confirms that the blue and green exposure positively supports the credit portfolio both in terms of profitability and risk management.

The banking system is among the key contributors to corporate finance and to enable continuous access to sustainable finance, the banking firms must be incentivized. While many studies analyze the impact of green lending, to the best of the authors’ knowledge, this study is among the very few that extend this analysis to blue economy firms.

This study aims to demonstrate and measure the impact of liquidity shocks on a bank’s solvency, especially when the bank does not hold sufficient liquid assets.

The proposed model is an extension of Merton’s (1974) model. It assesses the bank’s probability of default over one or two (short) periods relative to liquidity shocks. The shock scenarios are materialised by different net demands for the withdrawal of funds (NDWF) and may lead the bank to sell illiquid assets at a depreciated value. We consider the possibility of second-round effects at the beginning of the second period by introducing the probability of their occurrence. This probability depends on the proportion of illiquid assets put up for sale following the initial shock in different dependency scenarios.

We observe a positive relationship between the initial NDWF and the bank’s probability of default (particularly over the second period, which is conditional on the second-round effects). However, this relationship is not linear, and a significant proportion of liquid assets makes it possible to attenuate or even eliminate the effects of shock scenarios on bank solvency.

The proposed model enables banks to determine the necessary level of liquid assets, allowing them to resist (i.e. remain solvent) different liquidity shock scenarios for both periods (including eventual second-round effects) under the assumptions considered. Therefore, it can contribute to complementing or improving current internal liquidity adequacy assessment processes (ILAAPs).

The proposed microprudential approach consists of measuring the impact of liquidity risk on a bank’s solvency, complementing the current prudential framework in which these two topics are treated separately. It also complements the existing literature, in which the impact of liquidity risk on solvency risk has not been sufficiently studied. Finally, our model allows banks to manage liquidity using a solvency approach.

This study aims to address gaps and limitations in the literature regarding firms’ exposure to climate risks. It reviews existing research, proposes new theoretical frameworks and provides directions for future studies.

A bibliometric and systematic approach is used to review the literature on firms’ climate risk exposure. The study examines current theoretical frameworks and suggests additional ones to enhance understanding.

This study contributes to the climate finance literature by offering a comprehensive overview of firms’ climate risk exposure and used theories. It emphasizes the urgent need to tackle climate change and the crucial role of firms in climate risk management. The study supports the advancement of sustainability policies and highlights the importance of understanding firms' climate risk exposure.

This study informs the development of climate risk management strategies within firms and supports the implementation of effective sustainability policies.

Addressing climate risks can contribute to a more sustainable and resilient future for society as a whole.

This study provides a roadmap for future research by identifying gaps and limitations in the literature. It introduces new perspectives and theoretical frameworks, adding original insights to the field of study.

The study aims to investigate market reactions associated with the JUST 100 rankings published by JUST Capital, a non-profit organization, as well as differences in financial reporting quality and performance between selected firms and their industry peers.

This study uses a sample of 431 firms selected as the 100 America’s Most Just Companies between 2016 and 2020 by JUST Capital. This study performs both an event study to determine whether the rankings are useful to investors and cross-sectional regression analyses on the characteristics of selected firms compared to their peers.

This study finds that investors react positively to selected firms around the time of the release of the JUST 100 rankings, suggesting that the rankings are decision-useful. This study also finds that selected firms exhibit higher accounting quality and financial performance than their peers.

Rankings may not be free from bias because of JUST Capital’s ownership of an exchange-traded fund.

The findings validate the rankings as well as the methodology used by JUST Capital, as they show market participants value firms that engage in socially responsible actions through their commitment to positively impact five key stakeholder groups: employees, customers, communities, environment and shareholders.

To the best of the authors’ knowledge, this is the first study that shows the importance of the JUST 100 rankings for investment decisions. Considering the growing push for companies to disclose environmental, social and governance (ESG) activities, this study provides evidence to support ESG disclosure regulations.

This study aims to test whether over-investment is associated with environmental, social and governance (ESG) variation (i.e. inequality) across its dimensions, which, if so, would imply the prioritization of the interests of some stakeholders over those of others.

Drawing on a global sample of 29,428 observations across nine sectors and 41 countries between 2003 and 2019, the authors executed a country-industry-year fixed-effects regression analysis. In the robustness tests, this study also used the entropy balancing and propensity score matching approaches.

The authors found that while firm over-investment increases social pillar inequality, it reduces environmental pillar inequality. Further analysis revealed that the over-investment strategy decreases (increases) ESG inequality in low (high) environmental and social performers. This outcome could be of relevance to internal governance mechanisms and policymaking as ESG inequality might raise legitimacy concerns and hamper the long-term sustainability of firms.

The outcome of the study could be of relevance to internal governance mechanisms as well as policymaking. Considering financial constraints, firms should maintain a balanced strategy between firm investment and addressing stakeholder interests. Otherwise, over-investment might reduce environmental and social engagement in some dimensions, which could prompt criticisms and legitimacy concerns about firms and some stakeholders.

Past research has intensively focused on whether ESG – rather than ESG inequality – is associated with investment (in)efficiency. In addition, it has mostly formulated the causality running from ESG to firm investment, and hence, the literature lacks heterogeneity in this respect. Nevertheless, the authors believe that the potential effect of firm investment on ESG is of critical importance and has implications for determining whether over-investment causes variations across ESG engagement. Thus, the authors addressed this gap in the literature by investigating the relationship between over-investment and ESG inequality.