Sustainability-linked loans and Scope 1 emissions intensity: Selection or Treatment? : Evidence from European Industrial firms

Sammanfattning

Sustainability-linked loans have become an increasingly important part of sustainable finance, but it remains unclear whether they lead to real environmental improvements. This thesis examines whether firms that adopt sustainability-linked loans improve their Scope 1 emissions intensity. The study focuses on publicly listed European industrial firms from 2015 to 2024 and uses firm-level panel data to compare emissions intensity before and after SLL adoption. The analysis first uses two-way fixed effects models, followed by a staggered difference-in-differences approach based on Callaway and Sant’Anna (2021). This allows the study to account for differences in adoption timing and to address the possibility that firms adopting SLLs may already differ from non-adopters. The results show a consistent negative association between SLL adoption and Scope 1 emissions intensity. However, the preferred staggered difference-in-differences estimate is not statistically significant at conventional levels. Therefore, the findings suggest that SLL adoption is linked to lower emissions intensity, but they do not provide strong causal evidence that SLLs independently drive decarbonisation. The thesis contributes by focusing on a direct emissions-based outcome and by highlighting the importance of selection, contract transparency, and the difference between emissions intensity and absolute emissions.