{"id":46873,"date":"2026-05-06T15:00:00","date_gmt":"2026-05-06T07:00:00","guid":{"rendered":"https:\/\/www.tejwin.com\/?post_type=insight&#038;p=46873"},"modified":"2026-06-10T18:15:01","modified_gmt":"2026-06-10T10:15:01","slug":"empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions","status":"publish","type":"insight","link":"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/","title":{"rendered":"Empirical Study on TESG Rating: The Relationship between Corporate ESG Performance and Bank Lending Decisions"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"676\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/image-926-1024x676.png\" alt=\"\" class=\"wp-image-46874\" style=\"aspect-ratio:16\/9;object-fit:cover\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-926-1024x676.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-926-300x198.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-926-150x99.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-926-768x507.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-926.png 1027w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><em>Written by Professor Wan-Ying Lin of the Department of Accounting, National Chengchi University<\/em><\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_81 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a2c516fa778c\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"ez-toc-cssicon\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a2c516fa778c\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#Green_Finance_as_a_Driver_of_Corporate_Sustainability_Transformation_amid_the_ESG_Wave\" >Green Finance as a Driver of Corporate Sustainability Transformation amid the ESG Wave<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#Academic_Research_on_ESG_The_Relationship_between_ESG_Performance_and_Bank_Lending_Decisions\" >Academic Research on ESG: The Relationship between ESG Performance and Bank Lending Decisions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#Environmental_Social_and_Governance_Performance_and_Bank_Lending_Conditions_%E2%80%94_Hsieh_et_al_2025\" >Environmental, Social, and Governance Performance and Bank Lending Conditions \u2014 Hsieh et al. (2025)<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#Research_Topic\" >Research Topic<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#1_Is_there_a_relationship_between_ESG_performance_and_bank_lending_conditions\" >1. Is there a relationship between ESG performance and bank lending conditions?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#2_Whether_the_Relationship_between_ESG_Performance_and_Bank_Lending_Conditions_Is_Affected_by_Corporate_Financial_Performance\" >2. Whether the Relationship between ESG Performance and Bank Lending Conditions Is Affected by Corporate Financial Performance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#3_Whether_Abnormal_ESG_Performance_Is_Related_to_Bank_Lending_Conditions_and_Whether_This_Relationship_Is_Affected_by_Corporate_Financial_Performance\" >3. Whether Abnormal ESG Performance Is Related to Bank Lending Conditions, and Whether This Relationship Is Affected by Corporate Financial Performance<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#Research_Results\" >Research Results<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#1_Relationship_between_ESG_Performance_and_Bank_Lending_Conditions\" >1. Relationship between ESG Performance and Bank Lending Conditions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#2_Impact_of_Financial_Performance_on_the_Relationship_between_ESG_Performance_and_Bank_Lending_Conditions\" >2. Impact of Financial Performance on the Relationship between ESG Performance and Bank Lending Conditions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#3_Abnormal_ESG_Performance_and_Bank_Lending_Conditions\" >3. Abnormal ESG Performance and Bank Lending Conditions<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#Additional_Tests\" >Additional Tests<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#Conclusion\" >Conclusion<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tejwin.com\/en\/insight\/empirical-study-on-tesg-rating-the-relationship-between-corporate-esg-performance-and-bank-lending-decisions\/#TESG_Sustainability_Solutions_Supporting_Corporate_Sustainability_Transformation_and_Enhancing_ESG_Governance_Capabilities\" >TESG Sustainability Solutions: Supporting Corporate Sustainability Transformation and Enhancing ESG Governance Capabilities<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Green_Finance_as_a_Driver_of_Corporate_Sustainability_Transformation_amid_the_ESG_Wave\"><\/span><strong>Green Finance as a Driver of Corporate Sustainability Transformation amid the ESG Wave<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Financial institutions are major providers of corporate debt financing. Lending conditions affect not only banks\u2019 own interests, but also companies\u2019 funding costs and operations. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-black-color\">The World Economic Forum (WEF)<\/mark><\/strong> notes that green finance supports both environmental protection and sustainable development. <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Driven by the growing momentum of ESG, banks have actively implemented green finance initiatives by incorporating corporate ESG performance into their lending decisions. <\/mark><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-black-color\">The Bankers Association of the Republic of China<\/mark><\/strong> has also incorporated elements of the <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-black-color\">Equator Principles 4.0<\/mark><\/strong>, introduced in 2020, into its credit guidelines for member banks. Through financial mechanisms, banks encourage borrowers to place greater emphasis on environmental, social, and corporate governance issues, promote sustainable industrial development, and work toward carbon reduction targets.&nbsp;<\/p>\n\n\n\n<p>If banks only lend to companies with strong ESG performance, the limited number of eligible firms may affect banks\u2019 economic returns. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Therefore, while pursuing sustainability goals, banks should consider not only companies\u2019 financial conditions, but also how their ESG performance aligns with credit risk and lending decisions.<\/mark><\/strong>This raises an important question: when banks promote green finance, do they truly include ESG factors in loan approval decisions, and how do they measure the connection between corporate financial performance and ESG outcomes?<\/p>\n\n\n\n<p>\u00b9 According to an initial analysis by Hsiao et al. (2025), among Taiwanese listed and OTC companies from 2015 to 2020, the average share of companies compiling and providing standalone CSR\/ESG reports was 29.42%, or nearly 30%.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-100\"><a class=\"wp-block-button__link has-background has-medium-font-size has-custom-font-size wp-element-button\" href=\"https:\/\/www.tejwin.com\/en\/news\/tesg-ratings-2026-first-release\/\" style=\"background:linear-gradient(347deg,rgb(122,220,180) 0%,rgb(0,208,130) 100%)\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>\ud83d\udc49<\/strong><strong> Explore TESG Rating to support ESG risk assessment and responsible lending decisions.<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Academic_Research_on_ESG_The_Relationship_between_ESG_Performance_and_Bank_Lending_Decisions\"><\/span><strong>Academic Research on ESG: The Relationship between ESG Performance and Bank Lending Decisions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Recent domestic academic research on CSR\/ESG includes the study by<mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-black-color\"> <strong>Hsieh, An-Xuan , Lin Wan-ying, and Cheng Kuei-hui (2025).<\/strong> Using <strong>TEJ\u2019s TESG Sustainable Development Ratings<\/strong>,<\/mark> the study measures corporate ESG performance and incorporates variables such as credit rating, risk, corporate governance, and firm characteristics to examine the relationship between ESG performance and bank lending conditions, including loan spreads, loan size, loan maturity, and whether collateral is provided. The study received awards including the <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Best Paper Award at the 2023 Taiwan Accounting Association Annual Conference<\/mark> <\/strong>and the <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">14th Yuanta Golden Diamond Award. If you are interested in reading the full study<\/mark>,\ud83d\udc49<\/strong><a href=\"https:\/\/www.taiwanaa.org.tw\/wp-content\/uploads\/2025\/09\/%E4%B8%AD%E8%8F%AF%E6%9C%83%E8%A8%88%E5%AD%B8%E5%88%8A-211_01.pdf\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>please click the reference link.<\/strong><\/a><\/p>\n\n\n\n<p><strong>Hsieh et al. (2025) <\/strong>find that better ESG performance helps companies obtain more favorable lending conditions. The economic effect of ESG performance is most significant on loan amounts, followed by the likelihood of providing collateral, loan maturity, and loan spreads. <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"><strong>In addition,<\/strong><\/mark> <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">companies with stronger financial performance show a clearer relationship between ESG performance and bank lending terms.<\/mark><\/strong> Abnormally high or low ESG performance does not bring additional benefits in securing better loan conditions; instead, lending conditions tend to be weaker. The additional tests are broadly consistent with the main results.<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">This study provides preliminary empirical evidence on the relationship between corporate ESG performance and bank lending costs in Taiwan<\/mark>, <\/strong>helping clarify the economic consequences of ESG performance. Due to space limitations, this article briefly summarizes the research motivation and key findings of <strong>Hsieh et al. (2025).<\/strong><\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-100\"><a class=\"wp-block-button__link has-background has-medium-font-size has-custom-font-size wp-element-button\" href=\"https:\/\/www.tejwin.com\/en\/solution\/esg-sustainability-solution-2\/?utm_source\" style=\"background:linear-gradient(239deg,rgb(122,220,180) 0%,rgb(0,208,130) 100%)\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>\ud83d\udc49 <\/strong><strong>Strengthen ESG risk management and responsible lending decisions with TEJ\u2019s ESG Sustainability Solution.<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Environmental_Social_and_Governance_Performance_and_Bank_Lending_Conditions_%E2%80%94_Hsieh_et_al_2025\"><\/span><strong>Environmental, Social, and Governance Performance and Bank Lending Conditions \u2014 Hsieh et al. (2025)<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Research_Topic\"><\/span><strong>Research Topic<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>For banks, ESG-related lending decisions must still balance returns and risks. A company\u2019s profitability supports its ability to repay principal and interest. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Therefore, as long as credit risk is acceptable and repayment ability is sound, banks may provide financing regardless of the borrower\u2019s ESG performance.<\/mark><\/strong> However, to comply with regulations and fulfill their broader mission, banks must also consider the impact of environmental, social, and governance factors.<\/p>\n\n\n\n<p><strong>Hsiao et al. (2025)<\/strong> argue that, amid the institutional push for green finance, it is important to examine whether banks\u2019 lending decisions have shifted from focusing mainly on borrowers\u2019 financial performance to also considering ESG performance. The study therefore explores three key questions:<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Is_there_a_relationship_between_ESG_performance_and_bank_lending_conditions\"><\/span><strong>1. Is there a relationship between ESG performance and bank lending conditions?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Prior research suggests that companies with higher CSR\/ESG disclosure tend to show more stable long-term financial performance(Friede, Busch and Bassen 2015) , obtain funding from third parties under better terms(Goss and Roberts 2011) , and enjoy lower debt financing costs(Raimo, Caragnano, Zito, Vitolla and Mariani 2021; Eliwa et al. 2021) . <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">ESG and financial information are therefore both important determinants of debt financing costs.<\/mark><\/strong><\/p>\n\n\n\n<p>Companies that better address stakeholder needs can lower financing costs(Preston and O\u2019Bannon1997) , improve transparency, reduce information asymmetry(Garcia-S\u00e1nchez, Raimo, Marrone and Vitolla 2020)&nbsp; and credit risk( Atif and Ali 2021) , and ease customer constraints(Cheng, Ioannou, and Serafeim 2014; Hamrouni et al. 2019) . These factors may help firms obtain external financing under more favorable conditions(Raimo et al. 2021; He, Liu, and Chen, 2023) .<\/p>\n\n\n\n<p>Therefore, ESG information can complement risk-related information and help reduce debt financing costs. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Companies with stronger ESG performance are expected to receive more favorable bank lending conditions, including lower loan spreads, larger loan amounts, longer maturities, and no collateral requirement.<\/mark><\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Whether_the_Relationship_between_ESG_Performance_and_Bank_Lending_Conditions_Is_Affected_by_Corporate_Financial_Performance\"><\/span><strong>2. Whether the Relationship between ESG Performance and Bank Lending Conditions Is Affected by Corporate Financial Performance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p>Banks follow the <strong>5P principle<\/strong> in credit decisions to ensure credit rights and asset safety. In addition to requiring collateral, banks also consider borrowers\u2019 risk, repayment ability, financial information, and profitability. ESG information provides additional risk insights. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Ideally, banks should consider both ESG and financial performance. However,ESG initiatives often require substantial and long-term investment, making short-term benefits less visible.<\/mark><\/strong> Companies may face limited resources and trade-offs, meaning that improving ESG performance may come at the expense of short-term profitability.(Cheng et al., 2023)<\/p>\n\n\n\n<p>Both ESG information and financial information are important determinants of debt financing costs. However, <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">previous studies have paid less attention to whether the relationship between ESG performance and lending conditions is influenced by corporate financial performance<\/mark><\/strong>, especially as ESG disclosure becomes more common and banks are required to meet sustainability and green finance targets.<\/p>\n\n\n\n<p><strong>Hsieh et al. (2025) <\/strong>argue that when companies are unable to balance ESG and financial performance, lending banks may place greater weight on credit protection, profitability, and public-interest considerations. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">As a result, they may make trade-offs between non-financial ESG performance and financial performance when evaluating borrowers.<\/mark><\/strong> Therefore, the study examines whether the relationship between ESG performance and bank lending conditions is affected by corporate financial performance.<\/p>\n\n\n\n<p><strong>Figure 1. Research Framework for Research Question 2 in Hsieh et al. (2025)<\/strong><\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"468\" src=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/\/image-927-1024x468.png\" alt=\"\" class=\"wp-image-46878\" srcset=\"https:\/\/www.tejwin.com\/wp-content\/uploads\/image-927-1024x468.png 1024w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-927-300x137.png 300w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-927-150x69.png 150w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-927-768x351.png 768w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-927-1536x702.png 1536w, https:\/\/www.tejwin.com\/wp-content\/uploads\/image-927.png 1855w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><\/figure>\n\n\n\n<div style=\"height:20px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><strong>According to Figure 1,<\/strong> a reasonable expectation is that companies with both strong ESG and financial performance <strong>Group A<\/strong> should receive the most favorable lending conditions. By contrast, companies with both weak ESG and financial performance <strong>Group D <\/strong>should receive the least favorable lending conditions. The more interesting question is whether<strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">banks treat companies differently when ESG and financial performance are inconsistent,<\/mark><\/strong> as in <strong>Group B<\/strong> and <strong>Group C<\/strong>.&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Whether_Abnormal_ESG_Performance_Is_Related_to_Bank_Lending_Conditions_and_Whether_This_Relationship_Is_Affected_by_Corporate_Financial_Performance\"><\/span><strong>3. Whether Abnormal ESG Performance Is Related to Bank Lending Conditions, and Whether This Relationship Is Affected by Corporate Financial Performance<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p><strong>Normal CSR investment<\/strong> is part of corporate strategy and may help improve future operating performance. However, <strong>abnormal ESG investment<\/strong> may serve more as a reputation-building tool(Lys et al. 2015) . While it can enhance market recognition, it may not necessarily improve firm value or future financial performance, and may even create agency issues.<\/p>\n\n\n\n<p>Although ESG investment can bring companies a positive image, excessive ESG investment may cause costs to exceed benefits, leading to resource waste, higher financial burden, weaker financial performance, and conflicts with shareholder interests.Conversely, insufficient ESG investment may increase corporate risk, thereby raising banks\u2019 credit and reputational risks.<\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Therefore, abnormal ESG performance, whether higher or lower than expected, may be related to lending conditions, and this relationship may also be affected by corporate financial performance.<\/mark><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Research_Results\"><\/span><strong>Research Results<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>The following summarizes the findings of <strong>Hsieh et al. (2025)<\/strong> based on the research questions above.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"1_Relationship_between_ESG_Performance_and_Bank_Lending_Conditions\"><\/span><strong>1. Relationship between ESG Performance and Bank Lending Conditions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p><strong>Hsieh et al. (2025)<\/strong> find that bank lending decisions are influenced by corporate ESG performance. <strong>Specifically, <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">companies with stronger ESG performance tend to receive<\/mark><\/strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"> <strong>lower loan spreads, larger loan amounts, longer loan maturities, and are less likely to be required to provide collateral.<\/strong> <\/mark>The economic significance is strongest for loan amount, followed by <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">collateral requirement, loan maturity, and loan spread.<\/mark><\/strong><\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"2_Impact_of_Financial_Performance_on_the_Relationship_between_ESG_Performance_and_Bank_Lending_Conditions\"><\/span><strong>2. Impact of Financial Performance on the Relationship between ESG Performance and Bank Lending Conditions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p><strong>Hsieh et al. (2025)<\/strong> find that <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">companies with both strong ESG and financial performance receive consistently more favorable lending conditions<\/mark><\/strong>, while companies with weak performance in both areas receive less favorable terms. Holding other factors constant, firms with better ESG performance can still obtain better debt financing conditions than firms with weaker ESG performance, <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">suggesting that ESG may help offset weaker financial performance.<\/mark><\/strong><\/p>\n\n\n\n<p>Compared with firms that have weaker financial performance, firms with stronger financial performance show a stronger positive relationship between ESG performance and favorable lending conditions. <strong>In other words, <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">the positive link between strong ESG performance and better lending terms is mainly driven by firms with strong financial performance.<\/mark><\/strong><\/p>\n\n\n\n<p>For firms with mixed performance, companies with strong <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">ESG but weak financial performance receive significantly better non-price lending terms<\/mark><\/strong> than those with weak ESG but strong financial performance, although no significant difference is found in loan spreads.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"3_Abnormal_ESG_Performance_and_Bank_Lending_Conditions\"><\/span><strong>3. Abnormal ESG Performance and Bank Lending Conditions<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n\n\n\n<p><strong>Hsieh et al. (2025)<\/strong> find that companies with ESG performance above or below expectations, referred to as abnormal ESG performance, tend to receive worse loan spreads on incremental loans. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Firms with ESG performance below expectations receive significantly less favorable lending terms than those with ESG performance in line with expectations.<\/mark><\/strong><\/p>\n\n\n\n<p><strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">When firms overinvest in ESG<\/mark><\/strong>, banks may view this as increasing <strong>bankruptcy risk or agency conflicts<\/strong>, reflecting concerns over economic benefits. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">When firms underinvest in ESG<\/mark><\/strong>, banks may see <strong><em>higher credit and reputational risks<\/em><\/strong>, resulting in generally weaker lending terms.<\/p>\n\n\n\n<p>The relationship between abnormal ESG performance and lending conditions is also affected by financial performance. The negative effect of ESG overinvestment is mainly observed among firms with weaker financial performance, while the negative effect of ESG underinvestment is mainly observed among firms with stronger financial performance. In other words<strong>,<mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">companies with excessive ESG investment and weak financial performance receive worse lending terms; companies with insufficient ESG investment but strong financial performance also receive less favorable lending terms.<\/mark><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Additional_Tests\"><\/span><strong>Additional Tests<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p><strong>Hsieh et al. (2025)<\/strong> further conduct several robustness tests, including replacing variables, adding control variables, testing ESG sub-scores and firm-level analyses, examining individual ESG dimensions, and using cross-sectional analyses to assess whether the findings are consistent with the main results.<\/p>\n\n\n\n<p>In the E, S, and G sub-score tests,<strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">the study finds that the Social score has the strongest impact on lending conditions<\/mark><\/strong>, followed by Environmental and Governance performance. Cross-sectional tests show that companies issuing ESG reports,<strong> <\/strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"><strong>firms during the COVID-19 period, and borrowers with relatively poor ESG performance tend to receive better debt financing conditions<\/strong>.<\/mark> Sensitivity tests using different models and ESG rating measures also show results consistent with the main findings.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span><strong>Conclusion<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Under the influence of green finance, whether banks provide loans and how they set lending terms may affect both lenders\u2019 and borrowers\u2019 rights, returns, and costs. In addition to assessing borrowers\u2019 financial condition and repayment ability, banks should also consider ESG-related risks and corresponding risk management measures. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Non-financial information<\/mark><\/strong> related to ESG risks can be obtained from increasingly complete ESG or CSR reports, giving banks a stronger rationale to evaluate both financial performance and ESG performance.<\/p>\n\n\n\n<p>Hsieh et al. (2025) find that banks are more <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">willing to provide favorable lending terms to companies with stronger ESG performance.<\/mark><\/strong> These firms tend to receive lower loan spreads or no collateral requirement, while loan amount and maturity show no significant increase. <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\"><strong>The economic effect of ESG performance on lending conditions is significant, especially for loan amount<\/strong>.<\/mark><\/p>\n\n\n\n<p>In addition, financial performance has a moderating effect. <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">Companies with stronger financial performance show a stronger relationship between ESG performance and favorable lending conditions.<\/mark><\/strong> Firms with ESG performance above or below expectations tend to receive weaker lending conditions. Overall, the findings provide useful insights for regulators, companies, financial institutions, and the public.<\/p>\n\n\n\n<p><em><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\">Written by Professor Wan-Ying Lin\uff5cAssociate Professor, Department of Accounting, National Chengchi University. Her research focuses on financial accounting, group governance, and ESG sustainability, with a long-standing interest in the quality of corporate information disclosure and its practical development.&nbsp;<\/mark><\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"TESG_Sustainability_Solutions_Supporting_Corporate_Sustainability_Transformation_and_Enhancing_ESG_Governance_Capabilities\"><\/span><strong>TESG Sustainability Solutions: Supporting Corporate Sustainability Transformation and Enhancing ESG Governance Capabilities<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p><a href=\"https:\/\/www.tejwin.com\/en\/news\/tesg-rating\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>TEJ\u2019s TESG Rating<\/strong><\/a><strong> <mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">evaluate companies\u2019 their performance and disclosure depth across the three ESG pillars<\/mark><\/strong>: environmental, social, and governance. By offering multi-dimensional indicators, TEJ supports companies in understanding international trends and strengthening sustainability disclosure.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.tejwin.com\/en\/solution\/esg-sustainability-solution-2\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>TEJ\u2019s Sustainability Solutions<\/strong><\/a> <strong><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-luminous-vivid-orange-color\">provide one-stop support from information disclosure and risk analysis to decision-making applications<\/mark><\/strong>, helping companies and financial institutions enhance sustainability resilience and align with international standards.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button has-custom-width wp-block-button__width-100\"><a class=\"wp-block-button__link has-background has-medium-font-size has-custom-font-size wp-element-button\" href=\"https:\/\/www.tejwin.com\/en\/news\/tesg-rating\/\" style=\"background:linear-gradient(246deg,rgb(122,220,180) 0%,rgb(0,208,130) 100%)\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>\ud83d\udc49 <strong>Strengthen ESG governance and decision-making with TESG Rating.<\/strong><\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This article examines how corporate ESG performance affects bank lending decisions in Taiwan. Using TEJ\u2019s TESG Ratings, the study finds that companies with stronger ESG performance generally receive more favorable lending conditions, including lower loan spreads, larger loan amounts, longer maturities, and a lower likelihood of collateral requirements. The findings also highlight the importance of balancing ESG initiatives with financial performance, as excessively high or low ESG performance may lead to less favorable lending terms.<\/p>\n","protected":false},"featured_media":46876,"template":"","tags":[3204,3036,3059],"insight-category":[],"class_list":["post-46873","insight","type-insight","status-publish","has-post-thumbnail","hentry","tag-esg-2","tag-esg-sustainability-solution","tag-tesg-rating"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/46873","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight"}],"about":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/types\/insight"}],"version-history":[{"count":5,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/46873\/revisions"}],"predecessor-version":[{"id":46885,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight\/46873\/revisions\/46885"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media\/46876"}],"wp:attachment":[{"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/media?parent=46873"}],"wp:term":[{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/tags?post=46873"},{"taxonomy":"insight-category","embeddable":true,"href":"https:\/\/www.tejwin.com\/en\/wp-json\/wp\/v2\/insight-category?post=46873"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}