Environmental risk and cost of debt financing: A systematic review

Abstract

There is an increasing focus on environmental issues all over the world. These are associated with certain present and future costs. Firms are now paying attention to environmental risks for determining their capital structure. In this context, a number of studies have focused on studying the relationship between environmental costs and cost of debt financing. Present study is a review of published literature in the domain. After a review of recent papers, the study highlights trends in the domain and developments so far. The study concludes that environmental costs or carbon emissions are positively related to cost of debt financing.