Citation:
Weber, O. , Scholz, R. W. , & Michalik, G. . (2010). Incorporating sustainability criteria into credit risk management. Business Strategy and the EnvironmentBusiness Strategy and the Environment, 19, 39-50.
Abstract:
Does a commercial debtor’s economic, environmental and social performance in terms of
sustainability affect its credit risk rating? Does adding criteria aimed at assessing a lender’s
environmental, social or sustainability practices provide added value to traditional fi nancial
rating criteria? Many analyses have reported that a correlation exists between companies’
environmental and their financial performance. We checked out the assertion that it ‘pays
to be sustainable’ by analyzing the role that criteria pertaining to sustainability and environmental
orientation play in the commercial credit risk management process. Our results
show that sustainability criteria can be used to predict the financial performance of a debtor
and improve the predictive validity of the credit rating process. We conclude that the
sustainability a firm demonstrates influences its creditworthiness as part of its financial
performance.
sustainability affect its credit risk rating? Does adding criteria aimed at assessing a lender’s
environmental, social or sustainability practices provide added value to traditional fi nancial
rating criteria? Many analyses have reported that a correlation exists between companies’
environmental and their financial performance. We checked out the assertion that it ‘pays
to be sustainable’ by analyzing the role that criteria pertaining to sustainability and environmental
orientation play in the commercial credit risk management process. Our results
show that sustainability criteria can be used to predict the financial performance of a debtor
and improve the predictive validity of the credit rating process. We conclude that the
sustainability a firm demonstrates influences its creditworthiness as part of its financial
performance.
