Does environmental commitment improve access to finance? Evidence from small firms in Mauritius

Abstract

AbstractGiven the importance of climate change and the various ways to address it, this paper studies whether small firms that are environmentally committed are better able to access finance. It is important from a policy perspective to investigate if firms that care about climate change and sustainability are indeed being given all the incentives or if this is just a political discourse. The analysis is based on firm‐level data covering several years, which allows a temporal investigation as to whether environmental commitment is becoming an influential factor that affects access to finance. The results obtained highlight that although commitment to environmental issues is becoming more widespread in firms, they are still not important factors that affect access to external financing. The evidence regarding environmental commitment is mixed, since the paper also finds that several traditional factors continue to influence access to finance. Therefore, the providers of funds, especially banks should avoid paying lip‐service to their concern of the environment and abide by their discourse of facilitating access to finance, especially to firms having environmental commitments.