Abstract
Investor demand, political movements, and regulatory changes have increased the focus on sustainable finance in recent years. This has led to the development of a new green market offering sustainable debt instruments, which has marked a volume of more than $1 trillion in 2021. This column investigates the effectiveness of two green lending instruments, green and sustainable loans, in terms of their impact on firms’ environmental, social, and governance profiles. It finds that firms which issue green loans improve their environmental performance but neglect their social performance, whereas issuing sustainable loans increases a firm’s overall ESG performance.