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Dilemma of sustainable lending

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  • Felipe Calderon
  • Li Choy Chong

Abstract

This exploratory study investigates how banks, engaged in sustainable lending, monitor the performance of small and medium entrepreneur (SME) borrowers to be environmentally and socially responsible throughout the life of the loan. We focus on domestic banks that have adopted sustainable lending in their commercial lending activities to SMEs. A phenomenological inquiry into the lived experiences of four bankers based in Europe and one banker in North America revealed the lack of formal performance measurement systems to monitor compliance with sustainability requirements. We identify that banks resorted to the use of storytelling to report on the performance of their sustainable lending activities. The study concludes with two recommendations for banks. First, banks could avail of the services of external consultants who specialize in the measurement of sustainability activities. Second, banks could develop internal expertise through training and hiring of personnel with experience in measuring environmental and social impacts.

Suggested Citation

  • Felipe Calderon & Li Choy Chong, 2014. "Dilemma of sustainable lending," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 4(2), pages 192-209, April.
    • Handle: RePEc:taf:jsustf:v:4:y:2014:i:2:p:192-209
    DOI: 10.1080/20430795.2014.883302
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    References listed on IDEAS

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    Cited by:

    1. Maria Carolina Rezende de Carvalho Ferreira & Vinicius Amorim Sobreiro & Herbert Kimura & Flavio Luiz de Moraes Barboza, 2016. "A systematic review of literature about finance and sustainability," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 6(2), pages 112-147, April.
    2. Flögel Franz & Schepelmann Philipp & Zademach Hans-Martin & Zörner Michael, 2024. "Injecting climate finance into SME lending in Germany: Opportunities for and limitations of regional savings and cooperative banks," ZFW – Advances in Economic Geography, De Gruyter, vol. 68(2), pages 111-123.
    3. Jiang, Haiyun & Xu, Shulin & Cui, Jingwen & Subhani, Ghulam, 2023. "The impact of bank capital, liquidity and funding liquidity on sustainable bank lending: Evidence from MENA region," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 713-726.
    4. Jian Yang & Zhao Qu & Hui Chang, 2015. "Investigation on Law and Economics Based on Complex Network and Time Series Analysis," PLOS ONE, Public Library of Science, vol. 10(6), pages 1-16, June.

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