Pushing lenders to over-comply with environmental regulations: A developing country perspective
Article first published online: 28 MAY 2009
Copyright © 2009 John Wiley & Sons, Ltd.
Journal of International Development
Volume 22, Issue 4, pages 470–482, May 2010
How to Cite
Kulkarni, P. (2010), Pushing lenders to over-comply with environmental regulations: A developing country perspective. J. Int. Dev., 22: 470–482. doi: 10.1002/jid.1587
- Issue published online: 26 APR 2010
- Article first published online: 28 MAY 2009
- environmental codes;
- lending institutions;
- developing countries
In the past few years, the number of lenders adopting voluntary environmental codes, such as the Equator Principles, is increasing. The main reasons for this form of over-compliance include warm glow preferences of agents, credit risk and incentives arising from regulation. Empirical evidence suggests that lenders that over-comply are generally bigger than those that don't. In particular, they are likely to be MNCs. In addition, the behaviour of over-complying lenders differs from other lenders, for instance they are more likely to incorporate environmental risks in their lending practices. In the context of developing countries, incentives that promote over-compliance exist to much lesser degree. Analysing the regulatory environment in developing countries, we find no compelling reason for regulators to encourage voluntary initiatives such as the Equator Principles. Copyright © 2009 John Wiley & Sons, Ltd.