报告题目： On the (In)Efficiency of Sustainability-Linked Loans

报告摘要：Sustainability-linked loans (SLLs) link loan pricing to sustainability performance targets (SPTs) and are intended to reward compliant firms with cheaper capital. Yet evidence shows little reduction in borrowing spreads, mixed sustainability outcomes, larger loan sizes, and adoption concentrated among firms with low ESG risk; regulators also question incentive strength and target ambition. We ask how SLL incentives operate, why standard contracts lose effectiveness in competitive credit markets, and how they should be redesigned to preserve participation while achieving the highest sustainability level supported by consumer willingness to pay.

We develop a production–financing model in which sustainability investment raises consumer willingness to pay and production cost, while external borrowing creates a financing wedge. We show that standard SLLs operate through coercive, penalty-based commitment rather than cheaper capital: the discounted rate equals the ordinary-loan rate, while a high regular rate penalizes target failure. Without an attractive outside option, this threat redirects all borrower surplus toward sustainability, increasing effort and borrowing. With ordinary financing available, however, the participation constraint forces the SLL to preserve ordinary-loan profit, collapsing it to the ordinary-loan sustainability outcome.

We further show that government subsidies restore participation but require precise calibration: insufficient subsidies induce underinvestment, whereas excessive subsidies induce overinvestment.

We propose a refined SLL that pairs the target and penalty with a cash rebate offsetting the incremental financing wedge. It implements the highest sustainability level supported by consumer willingness to pay while preserving ordinary-loan profits for both parties. It induces strictly higher effort than standard SLLs when financing frictions are severe and subsidized SLLs when subsidies are insufficient.

报告人简介：Vernon Hsu is a Choh-Ming Li Chair Professor in the CUHK Business School, The Chinese University of Hong Kong. He had also held faculty positions at the University of New South Wales, Australia, George Mason University, USA, and Hong Kong University of Science & Technology. Professor Hsu’s research interests include operations and supply chain management. Some of his current research projects investigate the integration of international tax and financial planning with global supply chain management. His research has been published in journals such as Management Science, Manufacturing and Service Operations Management, Operations Research and Productions and Operations Management.