Conference Paper
Can Financial Access Improve Firms’ Environmental Performance?
No.
ERF32AC_163
Publisher
ERF
Date
May, 2026
Topic
L2. Firm Objectives, Organization, and Behavior
G2. Financial Institutions and Services
This study examines the impact of financial access on firm-level environmental sustainability by using data from the Business Environment and Enterprise Performance Surveys (BEEPS), which includes 28,000 surveys from 27 sectors in 41 countries. To achieve this, the paper contributes to three key areas of the literature. First, we analyze the effect of financial access on various dimensions of sustainable environmental performance, namely Energy, greenhouse gas (GHG) emissions, Water, Waste, and Air quality. Second, we use a comprehensive indicator of financial access that encompasses two binary variables: access to loans and access to overdraft facilities. Third, the paper employs an extended probit model approach with instrumental variables to account for endogeneity concerns when studying the effect of financial access on firm-level sustainability outcomes. This study controls for heterogeneity among firms (by country and sector), firm characteristics, reverse causality, and sample selection. Our findings suggest that firms with better financial access are more likely to invest in sustainable practices, such as energy efficiency and emissions reduction. Additionally, exporting firms and those with quality certifications exhibit superior environmental sustainability outcomes. However, weak institutional quality remains a key barrier to firms' adoption of sustainable business practices. These insights highlight the crucial role of financial access in enabling firms to transition toward greener and more sustainable operations.