The financial benefits of sustainability: Analyzing the impact of sustainable finance on capital costs for London stock exchange firms

The financial benefits of sustainability: Analyzing the impact of sustainable finance on capital costs for London stock exchange firms | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Article The financial benefits of sustainability: Analyzing the impact of sustainable finance on capital costs for London stock exchange firms Richard Arhinful, Leviticus Mensah, Hayford Asare Obeng, Bright Akwesi Gyamfi This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-6879927/v1 This work is licensed under a CC BY 4.0 License Status: Under Review Version 1 posted 17 You are reading this latest preprint version Abstract Corporations that implement sustainable financial strategies experience a reduction in borrowing costs. A broader range of investors, particularly those prioritizing ESG considerations, is typically attracted to these firms. Investors view a high cost of capital as an indicator of high risk, requiring a higher return to mitigate that risk. This study utilized the resource-based view (RBV) theory to examine the impact of investments in sustainable finance on the cost of capital. The selection of companies was guided by rigorous inclusion criteria, and a purposive sampling strategy was employed to collect 18 years of data from 227 companies listed on the London Stock Exchange between 2006 and 2023, using Thomson Reuters Eikon DataStream. The study employed the Common Correlated Effects Mean Group (CCEMG) and two-step Generalized Method of Moments (GMM) estimation methods to analyze the relationships between the variables. The findings indicate that green bonds issued, CSR expenditures, and investments in renewable energy positively and significantly impact the cost of debt, equity, and weighted average cost of capital (WACC). Conversely, sustainable-linked loans negatively and significantly affect the cost of debt. Additionally, the moderating relationship between a firm's age and the issuance of green bonds positively and significantly impacts the cost of debt, cost of equity, and WACC. To enhance their appeal to socially conscious investors, companies should demonstrate transparency regarding their environmental benefits, thereby boosting investor confidence in the organization. Business and commerce/Business and management Business and commerce/Finance Social science/Economics Cost of debt Cost of equity Sustainable finance Sustainability linked loans Weighted average cost of capital Figures Figure 1 Introduction The cost of capital is the minimum rate of return that a business must offer investors to attract investment (Hillier, 2024 ). Corporations typically raise funds through debt, equity, or a combination of both. The cost of capital reflects the potential financial loss of another project with a comparable risk level. Investors expect a minimum profit in exchange for financing an endeavor, making the cost of capital a critical factor in corporate funding and decision-making (Vernimmen et al., 2022 ). A high cost of capital indicates increased risk, which in turn necessitates a higher return to compensate for that risk (Vitolla et al., 2020 ). This situation can increase borrowing costs or reduce a firm’s ability to issue shares. Consequently, a high cost of capital may restrict a company’s capacity to invest in new projects, expand its operations, or explore growth opportunities (Lerner & Nanda, 2020 ). Investments must generate returns that exceed the cost of capital. In some cases, a high cost of capital can push companies to prioritize short-term financial gains over long-term strategic objectives to satisfy investors (Siegel, 2021 ). Conversely, a lower cost of capital suggests that investors view the business as less risky, enabling it to secure loans at lower interest rates (Franc-Dąbrowska et al., 2021 ). This increased financial flexibility allows the company to invest in strategic activities that may yield lower immediate returns but contribute to long-term growth. Additionally, a lower cost of capital can enhance competitiveness by enabling a firm to fund operations and expansions more cost-effectively than its competitors, leading to increased profitability and market share (Arhinful et al., 2024 ). The cost of capital directly influences business decisions such as capital budgeting, project evaluation, and financial planning (Siziba & Hall, 2021 ). Companies assess the feasibility of new investments by comparing the expected returns against the cost of capital. If the anticipated return exceeds the cost of capital, the investment is typically considered justified, as it is expected to increase the firm’s value. Conversely, if the projected return falls below the cost of capital, the project may be rejected due to the potential negative impact on the company’s overall worth (Eun et al., 2021 ). Sustainable finance integrates financial decisions with environmental, social, and governance (ESG) considerations (Li et al., 2023 ). It involves allocating funds to projects that promote sustainability, such as renewable energy, social development, and ethical practices, while still aiming for profitability. Sustainable finance aligns financial goals with broader societal and environmental objectives to support long-term, equitable economic growth (Ziolo et al., 2021 ). Investments in sustainable finance can reduce the cost of capital. Companies that adopt sustainable finance practices often experience lower borrowing costs (Setyowati, 2023 ). Such companies attract a broader range of investors, especially those prioritizing ESG factors. As the demand for securities from sustainable firms increases, the cost of equity may decline due to heightened investor interest (Wang et al., 2021 ). Lenders and investors often perceive firms with strong ESG practices as having lower risk profiles. Such perceptions can lead to more favorable financing terms, such as lower interest rates for loans (Abrantes & Ström, 2023 ). This reduced risk perception makes capital more affordable. Companies involved in sustainable finance may also benefit from specific financial instruments, such as sustainability-linked loans or green bonds, which typically offer more favorable terms than traditional financing options (Driessen, 2021 ). These instruments are designed to support projects with positive societal or environmental impacts and often include lower interest rates or additional benefits that further decrease the company’s cost of capital. Reducing the cost of capital can significantly benefit a firm by enabling it to finance growth and innovation, allocate resources to strategic initiatives, and improve its competitive position (Onileowo et al., 2021 ). Moreover, companies committed to sustainable finance can enhance their reputations, attract new investors, and build stronger relationships with stakeholders, promoting long-term success and resilience (Newmark & Pena, 2023 ; Arnell, 2022 ). Despite growing research interest, gaps remain in the literature regarding the effect of sustainable finance investments on the cost of capital. While a study has examined the impact of green bond issuance on the cost of capital (Zhang et al., 2021 ), it did not apply the definitions and measures typically used in corporate finance and financial management literature. This oversight could mislead firms operating in capital markets and using debt and equity to finance their operations. Moreover, this study did not analyze the impact of sustainable finance on the cost of debt, equity, and weighted average cost of capital (WACC), which are crucial measurements of the cost of capital. Additionally, the literature lacks research on how corporate social responsibility (CSR) expenditures, investments in renewable energy, and sustainability-linked loans influence the cost of capital, particularly the cost of debt, equity, and WACC, highlighting a knowledge gap. Company characteristics such as age and size can affect investment in sustainable finance. Larger and more established firms have greater resources and face greater scrutiny, enabling and compelling them to invest in sustainability. Smaller or newer companies may struggle with limited resources but may also emphasize sustainability to differentiate themselves and attract ESG-focused investors. However, the literature has not examined how a firm’s age and size moderate the relationship between green bond issuance, CSR expenditure, and the cost of capital. This study aims to address these gaps and contribute to the existing literature by investigating the impact of green bond issuance on the cost of capital. By addressing this gap, the study can reveal how green bonds influence capital costs, providing financial benefits to firms and encouraging greater investment in environmentally sustainable projects. If green bonds reduce capital costs, they may incentivize corporations to allocate more funds to eco-friendly initiatives, supporting environmental goals while reducing funding costs. This study also examines how CSR expenditures impact the cost of capital. Filling this gap is essential as it can show whether firms engaged in CSR activities benefit from lower financing costs. Financial advantages can encourage companies to increase their CSR investments, which can enhance brand image, strengthen stakeholder relationships, and further reduce capital costs. Addressing this gap can help companies fulfill their societal obligations and lead to more sustainable and profitable business strategies. Furthermore, the study explores the effect of sustainability-linked loans on the cost of capital. Understanding this relationship is crucial as it may reveal how effective these loans are in motivating firms to achieve sustainability objectives through financial rewards. If these loans lower capital costs, more firms might pursue ambitious sustainability goals, knowing that doing so could lead to reduced financing expenses. Such outcomes can promote ethical business practices and support broader environmental and social goals. The research also investigates the impact of investments in renewable energy on the cost of capital. Addressing this gap is vital as it could influence how investors perceive firms allocating resources to renewable energy, leading to lower financial risks and reduced financing costs. These potential economic benefits could motivate companies to invest more in renewable energy initiatives, accelerating the transition to sustainable energy sources. Insights from this study can also inform policy decisions to encourage greater business investment in renewable energy, thereby supporting global efforts to combat climate change. Lastly, the study analyzes the moderating role of firm age and size on the relationship between green bond issuance and the cost of capital. Older and larger companies may benefit from stronger brand reputations and financial stability, which can result in lower borrowing costs. Conversely, smaller or younger firms may face higher financing costs due to perceived risks. Understanding this dynamic can help firms optimize their financing and capital structure decisions, depending on their characteristics. Literature review and hypothesis development Theoretical perspective. The stakeholder theory, signalling theory, and resource-based view (RBV) theory have been widely used to examine how sustainable finance investments influence key performance indicators (KPIs). According to stakeholder theory, companies should consider the interests and concerns of all relevant parties when making decisions, rather than focusing solely on shareholders (Mensah & Bein, 2023 ). Implementing sustainable finance strategies can strengthen relationships with stakeholders, potentially lowering the cost of capital. However, stakeholder theory’s broad scope makes it challenging to isolate the specific impact of financial strategies like sustainable financing on the cost of capital. Additionally, the theory does not offer detailed strategies to explain how stakeholder engagement translates into financial benefits. Therefore, it may not be the most suitable framework for this study, which requires a more targeted financial approach. Signalling theory suggests that organizations convey information about their quality and risk to the market through their actions, such as participating in sustainable financing initiatives (Wang & Hussin, 2024 ). By engaging in sustainable finance projects, a company can signal its commitment to long-term sustainability, thereby reducing perceived risk and potentially lowering capital costs. While signalling theory establishes a link between sustainable finance and the cost of capital, it does not sufficiently address the internal resources and competencies needed to maintain a competitive advantage. Moreover, the theory places excessive emphasis on market perceptions and reactions. This reliance on external signals can be problematic, as market perceptions may not always accurately reflect an organization’s actual sustainability efforts or underlying value (Baier et al., 2022 ). The RBV theory is the most appropriate framework for explaining how sustainable finance investments affect the cost of capital. RBV theory argues that a company's unique assets and capabilities are key factors that provide it with a competitive advantage (Lubis, 2022 ). In the context of sustainable finance, the theory suggests that companies that engage in sustainable investments possess valuable, rare, and inimitable resources, which can lower their cost of capital (Aliane et al., 2023 ). Such investments can enhance a firm’s reputation, operational performance, and risk management capabilities—factors that are crucial for reducing borrowing costs. RBV theory focuses on a company's internal capabilities that contribute to its financial performance. RBV theory further posits that a company’s competitive advantage arises from its distinct resources and capabilities, which are valuable, rare, unique, and non-substitutable (Aliane et al., 2023 ). For example, green bonds are an effective financial instrument that can bolster a company’s reputation and demonstrate its commitment to sustainability. By issuing green bonds, a firm signals its support for global environmental goals, making its securities more attractive to investors (Yeow & Ng, 2021 ). According to the RBV theory, organizations can secure advantageous financing arrangements and reduce borrowing costs by leveraging distinctive resources such as green bonds. In line with RBV theory, CSR expenditure is viewed as a strategic investment in intangible assets, such as stakeholder trust and corporate reputation, which are valuable resources (Lin, 2024 ). Companies that allocate financial resources to CSR initiatives showcase their dedication to societal and environmental betterment, increasing their appeal to investors. This approach aligns with the RBV theory, which emphasizes the development of unique attributes that decrease perceived risk and thus lower capital costs (Maiti et al., 2020 ). Sustainability-linked loans offer a competitive advantage by linking financial performance to specific sustainability criteria. The RBV theory suggests that these loans strengthen a company’s commitment to sustainability as a core capability while also providing immediate financial benefits such as lower interest rates (Tan et al., 2022 ). Tying financial incentives to environmentally friendly actions creates a valuable and scarce asset that simultaneously reduces the cost of capital. Investments in renewable energy, such as infrastructure and specialized expertise, create unique resources that are difficult for competitors to replicate (Hartmann et al., 2021 ). According to RBV theory, companies can lower their cost of capital by developing distinct resources that improve operational efficiency and enhance their risk profile. Well-established firms with greater resources and expertise can effectively implement sustainable finance strategies to reduce their cost of capital. However, according to RBV theory, even newer and smaller firms can gain a competitive edge if they successfully create and leverage unique resources, such as innovative sustainability initiatives (Sulaeman & Kusnandar, 2020 ). Hypothesis Development The conceptual framework of this study is presented in Fig. 1 . The Influence of green bonds issue on the cost of capital Green bonds can influence a company’s cost of equity by enhancing its reputation and demonstrating a commitment to sustainability (Bhutta et al., 2022 ). This positive signal can attract investors who prioritize social responsibility, thereby lowering the required rate of return on the company’s stock. Maltais and Nykvist ( 2020 ) found that companies issuing green bonds experience a reduction in their equity costs due to increased investor interest in sustainable projects. Their findings suggest that issuing green bonds generally leads to a reduction in equity risk premiums, indicating a decline in the overall cost of equity. Green bonds can also affect the cost of borrowing. Typically, green bonds have lower interest rates compared to conventional bonds. Investors are often willing to accept lower returns in exchange for the positive environmental impact and perceived reduced risk associated with the issuer’s commitment to sustainability (Maltais & Nykvist, 2020 ). Teti et al. ( 2022 ) found that green bonds usually exhibit narrower spreads compared to government bonds. This suggests that companies issuing green bonds benefit from lower borrowing costs due to the market’s recognition and reward of their sustainable activities, resulting in reduced interest rates. The issuance of green bonds can also impact the weighted average cost of capital (WACC) by altering both equity and debt costs. Green bonds often lead to cost reductions in both areas, which in turn lowers a company’s overall WACC (Zhang et al., 2021 ). Eriksson and Heinrichs ( 2022 ) found that firms issuing green bonds have a lower WACC due to the combined effect of reduced borrowing and equity costs, highlighting the financial advantages of adopting sustainable and environmentally friendly investment strategies. Based on this discussion, the following hypothesis is proposed: H1 The issuance of green bonds has a positive and significant influence on the cost of capital. The Influence of CSR expenditures on the cost of capital Investing in CSR can affect a company's stock price by enhancing its reputation and lowering investors' perceived risk (Lu et al., 2021 ). Companies that engage in substantial CSR initiatives improve investor perceptions, which may reduce the equity risk premium demanded by shareholders. Dahiya and Singh ( 2021 ) found a positive relationship between increased CSR expenditure and a decrease in the cost of equity. This suggests that companies investing in CSR boost investor confidence, leading to a lower perceived risk and, consequently, a reduced required return on equity. Investing in CSR can also reduce borrowing costs by improving the company’s creditworthiness and risk profile (Boubaker et al., 2020 ). Financial institutions often view firms with strong CSR commitments as less risky, resulting in more favorable lending terms and lower interest rates. Khan et al. ( 2021 ) found that companies actively engaged in CSR are more likely to secure loans at lower interest rates. By implementing CSR initiatives, these firms enhance their risk profiles, making it easier to obtain loans at reduced interest rates and a lower credit risk premium. CSR investments can influence the WACC by reducing both the cost of debt and the cost of equity. Companies that invest in CSR may experience a lower WACC due to reductions in both components (AlKhouri & Suwaidan, 2023 ). For example, Mariani et al. ( 2021 ) found that firms allocating substantial resources to CSR activities tend to see a decrease in their WACC, attributed to lower borrowing costs from improved creditworthiness and reduced equity costs from increased investor confidence. These findings highlight the financial benefits of robust CSR practices. Based on this discussion, the following hypothesis is proposed: H2 CSR expenditures have a positive and significant impact on the cost of capital. The Influence of Sustainability linked loans on the cost of capital . Sustainability-linked loans can enhance a company’s reputation and investor perception, thereby affecting the cost of equity. By tying interest rates to specific sustainability benchmarks, these loans signal to investors that the company is committed to achieving long-term social and environmental goals (Liang & Renneboog, 2020 ). This signal can increase investor trust and reduce uncertainty about the company’s investments. Du et al. ( 2023 ) found that firms with strong sustainability practices—often demonstrated through sustainability-linked loans—tend to have lower equity costs. This may be due to heightened investor confidence and interest in companies that demonstrate a consistent commitment to sustainable practices. Sustainability-linked loans can also lower borrowing costs. When companies meet predetermined sustainability objectives, these loans typically offer reduced interest rates, directly incentivizing firms to adopt sustainable practices (Jin et al., 2022 ). Chai et al. ( 2022 ) found that companies utilizing sustainability-linked loans tend to have lower borrowing expenses, as lenders may perceive these firms as less risky due to their commitment to social and environmental goals, resulting in reduced interest payments. Sustainability-linked loans impact the WACC by decreasing borrowing costs through favorable loan terms and by enhancing investor confidence, which reduces the cost of equity (Yemelyanov et al., 2020 ). Chava and Roberts (2021) found that firms using sustainability-linked loans often experience a decline in their WACC due to the combined effect of reduced debt expenses and improved equity conditions resulting from enhanced sustainability credentials. Based on this discussion, the following hypothesis is proposed: H3: Sustainability-linked loans have a negative and significant impact on the cost of capital. The Influence of investment in renewable energy on the cost of capital Investing in renewable energy can lower the cost of equity by enhancing a company’s sustainability reputation and attracting investors who ESG factors. Equity investors often perceive companies committed to renewable energy as forward-thinking and dedicated to long-term sustainability, which reduces perceived risk (Grishunin et al., 2022 ). Zhang et al. ( 2021 ) found that companies that invest in renewable energy projects tend to experience a decrease in their cost of equity due to increased investor confidence and demand for environmentally sustainable practices. Their study concluded that such investments signal a company’s commitment to managing risks and pursuing future growth, thereby reducing the required return on equity. Investing in renewable energy can also enhance creditworthiness and reduce borrowing costs by improving a company’s environmental reputation. Lenders may view firms that allocate funds toward renewable energy investments more favorably (Wang & Zhao, 2022 ). Qadir et al. ( 2021 ) found that companies engaged in renewable energy projects often secure bank funding at lower interest rates. They noted that lenders are more likely to offer better terms to firms with strong renewable energy portfolios because these companies have fewer environmental liabilities and align with global sustainability trends. Renewable energy investments impact the WACC by influencing both debt and equity costs. The combined effect of reducing expenses in these areas can lower a company’s overall WACC. Polzin et al. ( 2021 ) found that firms that allocate resources to renewable energy typically experience a reduction in their WACC. The study attributed this decrease to reduced equity costs due to improved investor perceptions and lower borrowing costs resulting from favorable lending terms tied to sustainability. In the light of this discussion, the following hypothesis is proposed: H4 Investment in renewable energy has a positive and significant impact on the cost of capital. The moderating role of firm age in the relationship between green bond issue and cost of capital Firm age can affect investor views of risk and credibility, reducing the relationship between the cost of capital and the issuing of green bonds. Established firms typically possess a strong reputation, financial stability, and a track record of debt repayment—attributes that enhance investor confidence in their green bonds (Flammer, 2021 ). The lower risk premiums resulting from this improved credibility may contribute to a reduction in overall capital costs. Moreover, established firms may have stronger affiliations with rating agencies and investors, facilitating more favorable terms for green bond issuance than newer enterprises, which face heightened scrutiny and perceived risk (Langohr & Langohr, 2010 ). Conversely, despite their significant potential for innovation and sustainability, new companies may lack the financial foundation and market confidence necessary to secure advantageous capital costs when issuing green bonds (Shishlov et al., 2016 ). The restricted operational history and questionable long-term sustainability may make investors perceive them more hazardous. As a result, the capital costs for startups issuing green bonds may not decrease as significantly as those for more established enterprises. Companies can benefit from issuing green bonds by positioning themselves in the market and attracting impact-oriented investors, provided they can persuasively demonstrate their commitment to environmental, social, and governance (ESG) principles with strong financial performance (Arnell, 2022 ). H4: Firm age positively and significantly moderate the relationship between green bond issue and cost of capital. The moderating role of firm size in the relationship between green bond issue and cost of capital Firm size affects the extent of information asymmetry and market access, altering the relationship between green bond issuance and the cost of capital. Larger corporations typically possess well-established reputations, enhanced financial transparency, and greater visibility in financial markets, which reduce investor fear (Wright & Rwabizambuga, 2006 ). This transparency fosters investor confidence in the company's ability to meet its green bond commitments, reducing risk premiums and lowering capital costs. Moreover, large corporations can establish stronger relationships with institutional investors, enabling them to secure green financing at more favorable rates than smaller enterprises (Taghizadeh-Hesary & Yoshino, N2020). Conversely, smaller enterprises may encounter greater information asymmetry and investor skepticism over their financial health and commitment to ecologically sustainable initiatives (Siddique & Sciulli, 2018 ). Their inadequate track record may hinder their capacity to convince investors of the legitimacy of their sustainability initiatives, hence necessitating higher returns and diminishing the cost-reducing benefits associated with green bond issuance. Smaller companies can attract impact-driven investors, albeit at a higher cost than larger firms, if they effectively demonstrate strong environmental, social, and governance (ESG) performance and align their green bond frameworks with recognized standards. Methodology Data and sample The study was conducted in the United Kingdom due to its strong regulatory framework and well-developed sustainable finance market (Robins et al., 2020 ). The UK provides an ideal environment for research on sustainable finance owing to its robust financial system, frequent issuance of green bonds, and innovative financial instruments related to sustainability (Steffen, 2021 ). The study focused on the UK because of the nation’s strong commitment to integrating sustainability into financial practices. The research targeted non-financial companies publicly listed on the London Stock Exchange (LSE), a leading global financial center. The LSE's active role in promoting sustainable finance standards (Robins et al., 2020 ) was a key reason for this choice. Non-financial firms listed on the LSE share similar approaches to sustainable finance investments, enabling a comprehensive analysis of how such strategies influence the cost of capital. The findings encourage these companies to integrate sustainability more systematically into their financial decision-making processes, aligning with broader corporate sustainability goals and contributing to a more sustainable business landscape. Data for the study was obtained from Thomson Reuters Eikon DataStream, a reputable data repository known for its high-quality financial information. Companies were selected based on specific inclusion criteria to ensure a rigorous selection process. The first criterion required that companies be listed on the LSE between 2006 and 2023, the period under study. The second criterion was that firms must have complete data for the designated years in Eikon without any missing entries. Lastly, the selected companies must not be classified as financial institutions and must belong to particular industries in the UK, such as consumer goods, oil and gas, industrial products, construction, and automobiles. A purposive sampling technique was used to select 18 years of data for 227 companies between 2006 and 2023, resulting in 4,086 firm-year observations. Meeting these criteria also produced balanced panel data, which is essential for maintaining analytical integrity and eliminating biases associated with unbalanced data. Dependent, independent and moderating variables The study's dependent variable was the cost of capital, which includes the WACC, the cost of debt, and the cost of equity. Each variable was selected for its relevance to the study and its crucial role in understanding the cost of capital. The cost of equity represents the rate of return that shareholders expect from their investment in a company (Vernimmen et al., 2022 ). Evaluating the financial effects of sustainable financing is essential, as the cost of equity reflects the level of risk perceived by equity investors. This study employs the cost of equity to gain insights into how sustainable investments influence investor expectations and the required returns on equity. Implementing strong sustainable practices typically leads to a lower cost of equity, as investors view these companies as less risky, which results in more favorable financing terms (Yu et al., 2022). The cost of debt refers to the actual interest rate that a corporation incurs when borrowing money (Schroeder et al., 2022 ). This cost is influenced by prevailing interest rates and the company's creditworthiness. The significance of sustainable financing in this study lies in its potential to enhance a company's credit profile and reduce borrowing costs. Companies with strong sustainability credentials can often secure loans at lower interest rates, which helps decrease their overall borrowing expenses (Kimmel et al., 2020 ). Analyzing the cost of debt facilitates understanding how sustainable finance impacts loan terms and financial stability. WACC represents the average rate of return a firm must pay its shareholders and creditors, calculated based on the proportion of each component in the company’s capital structure (Warren et al., 2020 ). This metric is essential for assessing a company's overall cost of capital and evaluating investment opportunities by determining the total cost of financing. Independent variables The study employed green bonds issued, CSR expenditures, sustainability-linked loans, and investments in renewable energy as independent variables to represent the various investments companies make in sustainable finance. Green bonds are specifically issued to finance activities with positive environmental impacts (Bhutta et al., 2022 ). These bonds are designed to generate funds for environmentally conscious initiatives, such as installing renewable energy sources or enhancing energy efficiency. Green bonds serve as a relevant independent variable due to their direct connection to sustainable finance and their impact on capital costs. Companies that issue green bonds often benefit from reduced borrowing costs, as investors are enthusiastic about financing environmentally beneficial projects, leading to lower overall financing expenses for these companies (Lin & Su, 2022 ). CSR expenditures refer to the financial resources that a corporation allocates to social and environmental initiatives in alignment with its corporate social responsibility (Islam et al., 2021 ). The significance of these expenditures in the study lies in their ability to demonstrate a business's commitment to sustainability and their potential impact on investor perceptions. Increasing investments in CSR can signal to investors that a company is actively taking steps to mitigate its social and environmental effects, which may lead to a reduced perception of risk and, consequently, a lower cost of equity. Evidence shows that higher CSR expenditures enhance a company's brand and foster investor trust, resulting in improved financing conditions and reduced capital expenses (Ibrahim et al., 2021 ). Sustainability-linked loans are loans with interest rates determined by the borrower's performance in achieving specified sustainability objectives (Pohl et al., 2023 ). These loans provide financial incentives for corporations to meet specific social or environmental goals, establishing a direct correlation between financially beneficial activities and sustainable behaviors. This makes them an appropriate independent variable. Organizations with sustainability-linked loans often qualify for reduced interest rates if they successfully achieve their sustainability targets (Lagoarde-Segot, 2020 ). This relationship can lead to decreased borrowing costs and a lower cost of capital, illustrating the impact of sustainable financial solutions on financing expenses. Investments in renewable energy refer to funding directed toward initiatives and innovations that generate energy from renewable sources such as biomass, solar, and wind (Sun, 2020 ). The significance of this variable lies in its indication of a firm's commitment to sustainable energy solutions, which can influence the perceptions of lenders and investors. This variable is relevant due to the favorable ecological effects and reduced risks associated with renewable energy initiatives. By enhancing the company’s long-term growth opportunities and aligning with global sustainability trends, investments in renewable energy can contribute to a lower WACC. Control variables The study focused on three crucial control variables (age of the firm, the size of the firm, and leverage) to delve into their profound impact on the cost of capital. Firm age, a key indicator of a company's stability, experience, and market reputation, is pivotal in shaping its creditworthiness and borrowing expenses. Established enterprises can mitigate perceived investment risks with their cultivated relationships and financial expertise. By using firm age as a control variable, the study ensures that fundamental financial and operational factors, rather than firm maturity, drive the variations in the cost of capital. The size of a firm, particularly in the case of large corporations, significantly influences its financial stability and access to finance. These large entities, with their economies of scale, enhanced negotiation power with creditors, and increased access to diverse financing options, can reduce their capital costs. Their diminished default risk and heightened investor confidence further contribute to reduced interest rates and enhanced credit terms. By incorporating business size as a control variable, the study ensures that its impact does not distort the analyzed relationship, accounting for these financial advantages. Leverage, quantified by the debt-to-equity ratio, is a control variable that indicates a company's reliance on borrowed capital for expansion and operational activities (Amin & Cek, 2023 ). Fixed interest obligations and higher leverage increase financial risk, typically leading to an increased cost of capital. Nevertheless, moderate leverage may signify proficient capital structure management and fiscal discipline. The study employs leverage as a control variable to ensure that other financial factors' influence on the cost of capital is isolated, hence avoiding misinterpretation of results from variations in a company's debt financing strategies (Mensah et al., 2024 ). Table 1 Summary of variables Index Variable Symbol Formulae Dependent variable: 1 Cost of debt CODET \(\:\frac{Annual\:Interest\:Expense\:}{Total\:Debt}\:*\:(1-\:tax\:rate)\) 2 Cost of equity COEQT \(\:\frac{Dividend\:per\:share}{stock\:price\:}\:+\:Growth\:Rate\:of\:Dividends\) NB: Growth Rate of Dividends is differential growth (current different – previous dividend) / previous dividend * 100 3 WACC WACC \(\:(\frac{E}{V}\times\:Cost\:of\:Equity)+(\frac{D}{V}\:\:\times\:Cost\:of\:Debt\times\:(-Tax\:Rate\left)\right)\) “E” represents the market value of the company's equity. “D” represents the market value of the company's debt. “V” represents the total market value of the company (sum of equity and debt). Cost of Equity is the required rate of return on equity. Cost of Debt is the interest rate on debt. Tax Rate is the corporate tax rate. Independent variables : 1 Green bond issued GREB Log (Green bond issued) 2 CSR expenditures CSEX Log (CSR expenditures) 3 Sustainable linked loan SULN Log (Sustainability linked loans) 4 Investment in renewable energy INRE Log (Investment in renewable energy) Control variables : 1 Firm’s age FAGE From the year that the companies were incorporated on the stock market to the year in which the data was obtained. 2 Firm’s size FSIZ Log (total assets) 3 Leverage LEGE Total debt/ total equity The choice of regression estimation methods Selecting appropriate estimation methods is essential for ensuring precise data analysis results. The most suitable models were chosen through a three-step process. First, the presence of any associations among the units in the panel data was assessed using cross-sectional dependence tests. It is crucial to acknowledge cross-sectional dependence, as failing to do so may compromise the validity of the results (Ulucak et al., 2021). To determine cross-sectional dependence or independence, the Pesaran, Friedman, and Frees statistical tests were employed. The alternative hypothesis asserts the presence of cross-sectional dependence, while the null hypothesis asserts cross-sectional independence. The results in Table 2 support the alternative hypothesis, confirming the existence of cross-sectional dependence in the dataset. The second step involved the use of Pesaran-Yamagata tests to determine the heterogeneity or homogeneity of the panel datasets. This test aims to ascertain whether there are statistically significant differences in the relationships between variables across different units. While the null hypothesis supports homogeneity, the alternative hypothesis suggests heterogeneity. The findings presented in Table 2 indicate that the datasets are heterogeneous. Based on the results of the heterogeneity and cross-sectional dependence tests, the Common Correlated Effects Mean Group (CCEMG) method was selected as a reliable estimation approach for this study. The CCEMG method is particularly effective for modeling panel data with cross-sectional dependence and variable relationships between entities (Musah et al., 2024 ). It operates by calculating the average set of coefficients while considering shared attributes that affect all cross-sectional units. The CCEMG estimator provides a robust solution to cross-sectional dependence. Conventional estimation methods that assume independence among entities may yield biased results when faced with common disruptions or patterns. By statistically modeling the correlations between units, CCEMG addresses this issue, resulting in accurate estimates that reflect the true relationships within the dataset (Jijian et al., 2021 ). The ability of CCEMG to estimate effects specific to individual units underpins its effectiveness in managing heterogeneity (Boukhelkhal, 2022 ). This feature enhances data comprehension by allowing the model to incorporate variations in the relationships of variables across multiple units. CCEMG is a superior choice for research involving complex interactions and diverse effects across different groups, as it enhances the validity of findings by accounting for both individual and common factors. CCEMG was selected after evaluating various estimation methods, including random effects (RE), fixed effects (FE), and pooled ordinary least squares (POLS). Other estimation methods were deemed less appropriate for yielding unbiased results in the presence of cross-sectional dependence. While the FE model incorporates unobserved time-invariant characteristics, it does not account for cross-sectional dependence, potentially resulting in biased estimates (Arhinful et al., 2023 ). The RE model’s assumption of homogeneous variances across units is invalidated by the presence of heterogeneity, leading to inefficiencies. Additionally, the reliance of POLS on the assumption of independent errors across units limits its suitability for this investigation due to the presence of cross-sectional dependence and heterogeneity. The CCEMG estimator model is presented: $$\:{y}_{it}=\:{\alpha\:}_{it}+{\beta\:}_{i{X}_{it}}+\:{\lambda\:}_{i}^{ᵎ}{f}_{t}+{u}_{it}$$ Where “ \(\:{y}_{it}"\) is the dependent variable for unit i at time t. \(\:{X}_{it}\) is the independent variable(s) for unit I and at time t. \(\:{\alpha\:}_{it}\) is the individual- specific factors \(\:{\beta\:}_{i}\) is the coefficient for the independent variable(s) for unit i. \(\:{f}_{t}\) is represents the unobserved common factors that affect all units in the panel. \(\:{\lambda\:}_{i}^{ᵎ}\) is the factor loading for unit 𝑖 \(\:{u}_{it}\) is the error term The third step involved testing for endogeneity to determine whether the independent variables were endogenous or exogenous. The Wu-Hausman and Durbin-Wu-Hausman (DWH) tests were employed to assess the endogeneity of the independent variables. The results presented in Table 2 support the alternative hypothesis, indicating the presence of endogeneity among the independent variables. Consequently, the generalized method of moments (GMM) was chosen to address this endogeneity issue. GMM's effectiveness in tackling endogeneity arises from its ability to provide consistent estimates, even when the independent variables and error terms are correlated (Arhinful & Radmehr, 2023 ). This estimation method is particularly suited for dynamic panel data analysis due to its capacity to leverage the complexity of the data across various entities and time periods. By implementing data-driven moment conditions, GMM enhances the robustness of the analysis, leading to more accurate estimations (Mensah et al., 2024 ). Compared to two-stage least squares (2SLS), GMM offers distinct advantages. While the 2SLS method utilizes instrumental variables to mitigate endogeneity, its reliance on robust instruments may lead to bias if these instruments are of inferior quality (Keane et al., 2021). GMM addresses this issue by incorporating a broader range of moment conditions, thereby improving the precision of the findings. Furthermore, GMM is the most appropriate method for addressing endogeneity in this study, as it can effectively resolve various econometric challenges, including heteroscedasticity and autocorrelation (Arhinful et al., 2023 ). The GMM model is presented as follows: $$\:{\theta\:}^{GMM}=argmin\theta\:\left\{\left(\frac{1}{N}\:{\sum\:}_{i-1}^{N}\text{g}(\text{y}\text{i}\text{},\text{x}\text{i}\text{},\text{Z}\text{i}\text{})\right)\:W\left(\frac{1}{N}\:{\sum\:}_{i-1}^{N}\text{g}(\text{y}\text{i}\text{},\text{x}\text{i}\text{},\text{Z}\text{i}\text{})\right)\right\}$$ Where: \(\:\widehat{\theta\:}\) GMM​ is the Two-Step GMM estimator of the parameter vector θ. W is a weighting matrix that optimizes the efficiency of the estimator Table 2 Cross sectional dependence, heterogeneity and endogeneity test Types of CD tests Cost of debt Cost of equity WACC Pesaran's test 77.262 (0.000) *** 3.167 (0.000) *** 66.731 Friedman's test 1698.096 (0.000) *** 906.888 (0.000) *** 1436.692 Frees' test 3.167 (0.000) *** 0.688 (0.000) *** 2.253 (0.000) *** Heterogeneity test (Peseran-Yamagata test) Δ-tilde stat. 31.345 (0.000) *** 12.034 (0.000) *** 23.842 (0.000) *** Δadj-tilde stat. 45.341 (0.000) *** 15.982 (0.000) *** 34.914 (0.000) *** Endogeneity tests Durbin-Wu-Hausman (DWH) Test 12.823 (0.000) *** 11.232 (0.000) *** 16.412 (0.000) *** Wu-Hausman test 9.903 (0.000) *** 18.320 (0.000) *** 10.311 (0.000) *** *** p < .01, ** p < .05, * p < .1 Model specification This study employed three models to examine the relationship between investment in sustainable finance and the cost of capital. Model 1 presents the direct relationship between investment in sustainable finance and the cost of capital. Model 2 presents the moderating role of age, and model 3 presents the moderating role of a firm's size in this relationship. Model 1 $$\:COC={\beta\:0}_{n,\:c}+{\beta\:1GREB}_{n,\:c}+\:{Log\beta\:CSEX}_{n,\:c}+\:Log{\beta\:3SULN}_{n,\:c}+\:{\beta\:4INRE}_{n,\:c}+\:{\beta\:5FAGE}_{n,\:c}+{\beta\:6FSIZ}_{n,\:c}+{\beta\:7LEGE}_{n,\:c}+\:{u}_{n,\:c}$$ Model 2 $$\:COC={\beta\:0}_{n,\:c}+{\beta\:1GREB}_{n,\:c}+\:{Log\beta\:CSEX}_{n,\:c}+\:Log{\beta\:3SULN}_{n,\:c}+\:{\beta\:4INRE}_{n,\:c}+\:{\beta\:5FAGE}_{n,\:c}+{\beta\:6FSIZ}_{n,\:c}+{\beta\:7LEGE}_{n,\:c}+{\beta\:8GREB*FAGE}_{n,\:c}+\:{u}_{n,\:c}$$ Model 3 $$\:COC={\beta\:0}_{n,\:c}+{\beta\:1GREB}_{n,\:c}+\:{Log\beta\:CSEX}_{n,\:c}+\:Log{\beta\:3SULN}_{n,\:c}+\:{\beta\:4INRE}_{n,\:c}+\:{\beta\:5FAGE}_{n,\:c}+{\beta\:6FSIZ}_{n,\:c}+{\beta\:7LEGE}_{n,\:c}+{\beta\:8GREB*FSIZ}_{n,\:c}+\:{u}_{n,\:c}$$ NB The meanings of the variable abbreviations can be found in Table 1 . COC denotes the cost of capital (CODET, COEQT, WACC), “n” denotes time, “c” donates companies, and “u” denotes the error terms. Results and discussions Table 3 Descriptive Statistics Variable Obs Mean Std. Dev. Min Max VIF 1/VIF Cost of debt 4086 4.427 3.248 1.216 10.031 - - Cost of equity 4086 3.503 3.164 1.22 88.613 - - WACC 4086 4.096 3.090 .601 11.444 - - Green bond issued 4086 7.332 .756 5.300 10.078 2.378 .421 CSR expenditures 4086 7.683 .694 6.164 10.339 2.863 .349 Sustainability linked loans 4086 7.279 .71 .058 9.958 1.923 .520 Investment in renewable energy 4086 7.258 .746 .022 9.907 2.279 .439 Firm age 4086 61.807 16.052 2 128 1.105 .905 Firm size 4086 1.497 .836 0.232 5.43 1.502 .666 Leverage 4086 1.345 .782 0.032 12.453 1.003 0.997 Table 3 presents the descriptive statistics for the variables. The average cost of debt, which represents the interest rate borrowers pay on borrowed funds, directly impacts both the cost of financing and the company's profitability. Similarly, the average cost of equity, reflecting the rate of return that equity investors require, plays a crucial role in a company's valuation and influences its capital structure decisions. The average WACC aggregates equity and debt financing, serving as a key indicator of a company's financial health and sustainability performance. The average amount of green bonds issued by the company signifies a substantial financial commitment to environmentally beneficial projects that align with its sustainability goals. Likewise, the average CSR expenditures reflect the company's strong dedication to social responsibility, shaping its reputation and relationships with stakeholders. The mean for sustainability-linked loans indicates the company's strategic use of funding tied to sustainability performance, promoting long-term environmental and social objectives. The average investment in renewable energy demonstrates the company's commitment to sustainable energy sources, environmental innovation, and reducing carbon footprints. Additionally, the company's average age reflects its level of maturity, influencing its market expertise, stability, and strategic choices. The average size of the corporation indicates its operational scope and affects its financial robustness and market influence. The Variance Inflation Factor (VIF) was employed to assess the presence of multicollinearity among the specified variables. VIF values greater than 5 indicate the presence of multicollinearity (Arhinful et al., 2023 ). The VIF reported for all the independent variables is less than 5, suggesting the absence of significant multicollinearity among them. Table 4 Matrix of correlations Variables (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (1) Cost of debt 1.000 (2) Cost of equity 0.049 1.000 (3) WACC 0.506 -0.049 1.000 (4) Green bond issued 0.051 0.021 0.037 1.000 (5) CSR expenditures 0.041 0.021 0.026 0.360 1.000 (6) Sustainability linked loans 0.021 0.018 0.009 0.416 0.424 1.000 (7) Investment in renewable energy 0.050 0.018 0.035 0.266 0.549 0.241 1.000 (8) Firm age 0.031 0.017 0.025 0.242 0.274 0.295 0.233 1.000 (9) Firm size -0.093 -0.014 -0.089 -0.104 0.044 0.236 -0.072 0.120 1.000 (10) Leverage 0.031 0.102 0.008 0.512 0.007 0.382 0.003 0.052 0.081 1.000 Table 4 presents the results of the correlation matrix analysis, which was conducted to assess multicollinearity among the independent variables. Multicollinearity is indicated when two independent variables have correlation coefficient values exceeding 0.70. The matrix results showed that the coefficients of the independent variables were below 0.70, suggesting a lack of multicollinearity. Additionally, the VIF analysis in Table 3 further supports this finding, indicating that the dataset is free from multicollinearity. Table 5 Unit root tests Variable Cross-sectional Augmented Dickey-Fuller (CADF) test Cross-sectional Augmented IPS (CIPS) Levels 1st Difference Levels 1st Difference Cost of debt -41.946 (0.000) *** -78.229 (0.000) *** -36.219 (0.000) *** -74.790 (0.000) *** Cost of equity -48.940 (0.000) *** -82.787 (0.000) *** -44.633 (0.000) *** -81.500 (0.000) *** WACC -42.579 (0.000) *** -78.406 (0.000) *** -36.909 (0.000) *** -75.348 (0.000) *** Green bond issued -43.334 (0.000) *** -73.835 (0.000) *** -38.052 (0.000) *** -71.219 (0.000) *** CSR expenditures -43.068 (0.000) *** -75.002 (0.000) *** -37.393 (0.000) *** -73.056 (0.000) *** Sustainability linked loans -42.999 (0.000) *** -76.226 (0.000) *** -37.059 (0.000) *** -74.452 (0.000) *** Investment in renewable energy -43.215 (0.000) *** -74.351 (0.000) *** -37.794 (0.000) *** -71.856 (0.000) *** Firm age -50.539 (0.000) *** -85.403 (0.000) *** -47.793 (0.000) *** -88.433 (0.000) *** Firm size -46.393 (0.000) *** -81.726 (0.000) *** -42.644 (0.000) *** -81.107 (0.000) *** Leverage -32.942 (0.000) *** -78.342 (0.000) *** -16.842 (0.000) *** -78.932 (0.000) *** *** p < .01, ** p < .05, * p < .1 Table 5 presents the results of the panel unit root tests for the variables. This study employed the Cross-sectional Augmented Dickey-Fuller (CADF) and Cross-sectional Augmented IPS (CIPS) tests to determine whether the panel datasets are stationary or contain unit roots. These tests are specifically designed to account for the potential influence of cross-sectional dependence on unit root assessments. The CADF test, an extension of the traditional Augmented Dickey-Fuller (ADF) test, incorporates cross-sectional averages and is suitable for scenarios where variables from different units may influence one another. Additionally, the CIPS test enhances the IPS test by including cross-sectional dependence, resulting in a more reliable assessment of stationarity. The alternative hypothesis posits that individual variables exhibit stationarity, while the null hypothesis for both tests asserts that each variable possesses a unit root. The findings support the alternative hypothesis, confirming that the variables exhibit stationarity at both their levels and first differences. Including stationary variables is crucial to avoid misleading regression results and ensure that data interactions are precise and accurately represent underlying dynamics. Table 6 Common Correlated Effects Mean Group (CCEMG)results Cost of debt Cost of equity WACC Variables Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Green bond issued 0.669 * (0.384) 0.102 *** (0.043) 0.473 *** (0.103) 0.444 ** (0.203) 0.255 *** (0.054) 0.771 *** (0.301) 0.694 *** (0.204) 0.127 ** (0.060) 0.137 *** (0.056) CSR expenditures 0.730 * (0.430) 0.904 * (0.467) 0.627 *** (0.213) 0.244 *** (0.105) 0.396 *** (0.123) 0.698 *** (0.303) 0.960 *** (0.391) 0.123 * (0.066) 0.239 *** (0.027) Sustainability linked loans -0.268 *** (0.046) -0.310 *** (0.118) -0.197 *** (0.023) 0.210 *** (0.025) 0.583 *** (0.221) 0.275 *** (0.102) 0.460 * (0.261) 0.538 ** (0.262) 0.598 *** (0.204) Investment in renewable energy 0.014 *** (0.003) 0.133 *** (0.042) 0.026 *** (0.002) 0.919 ** (0.438) 0.862 *** (0.462) 0.945 *** (0.426) 0.305 *** (0.096) 0.247 *** (0.075) 0.289 *** (0.084) Firm age 0.005 *** (0.001) 0.013 *** (0.002) 0.004 ** (0.002) 0.030 *** (0.012) 0.061 *** (0.022) 0.038 *** (0.003) 0.004 *** (0.001) 0.018 * (0.010) 0.017 * (0.009) Firm size -0.103 * (0.059) -0.126 ** (0.058) -0.386 *** (0.143) 0.200 *** (0.023) 0.322 *** (0.067) 0.168 *** (0.058) 0.092 *** (0.021) 0.115 *** (0.021) 0.136 *** (0.052) Leverage 0.873 *** (0.102) 0.802 *** (0.112) 0.871 *** (0.103) 0.573 *** (0.121) 0.582 *** (0.121) 0.588 *** (0.118) 0.209 *** (0.032) 0.218 *** (0.030) 0.229 *** (0.032) Green bond * Age 2.139 ** (0.994) 0.477 *** (0.173) 0.279 * (0.102) Green bond * Size -0.069 *** (0.021) 0.235 *** (0.081) 0.391 *** (.108) Constant 0.063 *** (0.021) 1.479 *** (0.436) 0.297 *** (0.041) 0.072 *** (0.013) 4.544 *** (1.451) 4.235 *** (1.034) 0.088 *** (0.036) 2.002 *** (0.045) 0.087 *** (0.031) Number of observations 4086 4086 4086 4086 4086 4086 4086 4086 4086 Wald tests 33.24 (0.000) 34.63 (0.000) 35.59 (0.000) 32.04 (0.000) 44.29 (0.000) 65.43 (0.000) 28.08 (0.000) 29.81 (0.000) 29.99 (0.000) RMSE 2.0167 2.0078 2.0088 21.9430 21.8839 21.7926 2.1930 2.1841 2.1923 *** p < .01, ** p < .05, * p < .1 Table 6 presents the results of the CCEMG estimator, showing the effect of investment in sustainable finance on the cost of capital. The effect of investment in sustainable finance on the cost of debt The study found that the issuance of green bonds has a positive and significant relationship with the cost of debt, aligning with the study's hypothesis. These findings support the RBV theory, which posits that green bonds can enhance a company's credibility and reputation, thereby reducing financing costs, as they are considered valuable and unique assets (Rouhelo & Kepsu, 2022 ). This indicates that green bonds, as distinctive assets, provide a competitive advantage in the market by offering more favorable financial conditions. The positive relationship can be attributed to the inherent appeal of green bonds to a broader range of socially conscious investors, which boosts demand and lowers borrowing costs (Kumar, 2022 ). By signaling a company's commitment to sustainability, green bonds mitigate perceived risks and decrease the cost of debt. From an economic perspective, these findings suggest that firms issuing green bonds can secure funding at a lower cost, enabling them to allocate a greater portion of their resources to environmentally beneficial projects. This can lead to increased long-term cost savings, enhanced financial performance, and a stronger market position, ultimately improving the company's overall value and competitiveness. Additionally, green bonds allow investors to access loans at lower interest rates, potentially incentivizing more companies to adopt environmentally and socially responsible practices (Zhao et al., 2022 ). The study also revealed that CSR expenditures positively and significantly impact the cost of debt, further supporting the study's hypothesis. These findings align with the RBV theory, which suggests that viewing CSR expenditures as strategic assets can enhance a company's reputation and stakeholder relationships, thereby lowering the cost of debt (Khan et al., 2019 ). The results indicate that investments in CSR are valuable assets that improve financial conditions and reinforce competitive advantages. This positive relationship is attributed to CSR activities fostering trust among investors and lenders, which diminishes perceived risks associated with the firm and lowers borrowing costs (Bugandwa et al., 2021 ). Furthermore, firms engaged in CSR activities are often perceived as more resilient and less vulnerable to regulatory or reputational challenges, contributing to a lower overall cost of debt. The economic implications suggest that companies investing significant resources in innovation and growth can access more favorable financing options. Reduced borrowing costs can enhance financial performance and attract socially responsible investors, further strengthening long-term sustainability and market position. Additionally, the positive influence of CSR on credit interest rates can encourage more corporations to prioritize social responsibility, yielding broader economic and social benefits (Schwartz et al., 2017). The study also found that sustainability-linked loans have a negative and significant impact on the cost of debt, with this significant effect supporting the study's hypothesis. These findings are consistent with the RBV theory, which suggests that strategically implementing sustainability-linked loans can help firms improve financial efficiency by aligning operations with sustainable standards (Manurung et al., 2024 ). The results provide evidence that loans tied to sustainability can encourage and reward sustainable practices, thereby lowering interest rates. Sustainability-linked loans typically offer more favorable terms, such as reduced interest rates, when specific sustainability goals are met, thus decreasing the overall borrowing cost (Pohl et al., 2023 ). This contributes to the observed negative impact. By engaging in sustainability-linked finance, firms can further lower their borrowing rates, as they are perceived as lower-risk borrowers due to their commitment to ESG criteria. These findings hold economic implications for corporations, suggesting that firms securing sustainability-linked loans can significantly reduce their debt burdens, allowing them to allocate more resources toward innovation and sustainability initiatives. Investors who prioritize ESG principles find financially stable companies more attractive, facilitating the achievement of both goals (Ermawati, 2024 ). Furthermore, the growing prevalence of sustainability-linked financing may motivate more enterprises to integrate sustainability into their strategic decisions, resulting in substantial benefits for society, the environment, and financial performance (Derchi et al., 2021 ). The results also indicated that investment in renewable energy has a positive and significant impact on the cost of debt, supporting the study's hypothesis. These findings are consistent with the RBV theory, which argues that investing in renewable energy can serve as strategic resources that enhance a firm's long-term competitive advantage (Khanra et al., 2022 ). Investing in renewable energy not only increases asset value but also helps lower financing costs by positioning the company as innovative and environmentally conscious (Gawusu et al., 2022 ). Firms allocating funds toward renewable energy sources often incur reduced financing costs due to government subsidies, incentives, or favorable lending conditions that support clean energy projects (Jin et al., 2022 ). This factor contributes to the positive impact observed. Lenders and investors tend to view firms that invest in renewable energy positively, expecting that such investments will effectively reduce long-term operational risks associated with fossil fuels. Consequently, these firms often benefit from lower interest rates and a reduced perceived level of risk. From an economic perspective, these findings indicate that investing in renewable energy can lower financing costs, allowing companies to redirect funds toward other strategic projects or further portfolio expansion (Sotnyk et al., 2022 ). Moreover, this advantage enhances the company's financial performance and strengthens its market position while advancing its environmental goals. This trend could accelerate the adoption of sustainable practices across multiple sectors as firms allocate resources to renewable energy, leading to broader economic and ecological benefits. The study found that the moderating relationship between firm age and the issuance of green bonds has a positive and significant impact on the cost of debt. Conversely, the moderating relationship between firm size and the issuance of green bonds has a negative and significant impact on the cost of debt. These findings align with the RBV theory, suggesting that a company's use of strategic resources, like green bonds, can influence the cost of debt, conditioned by factors such as the firm's size and age (Romano et al., 2024 ). The findings support the theory by demonstrating that a company's age positively alters the relationship between the cost of debt and the issuance of green bonds. Established firms with strong reputations and long histories may use green bonds to secure more favorable loan conditions, as lenders perceive them as lower risk. Financial institutions are generally more inclined to offer lower interest rates to well-established companies due to their perceived reliability and stability (Boot et al., 2021 ). This factor likely contributes to the positive effect observed. Conversely, firm size may negatively influence the relationship between green bonds and the cost of debt, suggesting that larger firms face complexities and potential inefficiencies. Larger corporations may experience delays in capitalizing on the benefits of green bonds, resulting in less favorable lending conditions. Additionally, the potential cost savings from issuing green bonds may be counterbalanced by the increased regulatory requirements and scrutiny that larger companies typically face (Zhao et al., 2022 ). These findings carry financial implications, suggesting that firms should strategically manage their debt costs by considering their age and size when issuing green bonds (Bhutta et al., 2022 ). The issuance of green bonds presents greater benefits for established firms, enabling them to reinvest in growth or sustainability projects while lowering financing costs. However, larger companies may need to enhance their operational efficiency and strategic planning to fully optimize the financial advantages of green bonds and prevent their size from hindering their ability to secure favorable loan terms. The effect of investment in sustainable finance on the cost of equity The study found a positive and significant relationship between green bond issuance and the cost of equity, supporting the study's hypothesis. These results align with RBV theory, which posits that green bonds and other unique resources can influence a firm's financial structure, including its stock price (Chen, 2024 ). The theory is substantiated by the positive impact of these issuances on stock issuance costs, as the market views green bonds as indicative of a company's commitment to sustainability. Despite the premium investors demand for sustainability-focused investments, this approach can enhance the firm's reputation, attract a broader range of investors, and increase demand for its shares (Kalikhan et al., 2021 ). This rationale explains the positive association between green bonds and sustainable initiatives, which yield societal and environmental benefits but also carry risks that may affect returns. Investors may perceive green bonds as evidence that the corporation is making significant investments in sustainability (Agliardi & Agliardi, 2021 ). Consequently, to mitigate the perceived risks associated with these investments, investors seek higher returns on equity. Additionally, the long-term investment horizon linked to green bonds may lead stock investors to demand greater returns, indicating a stronger preference for long-term sustainability over short-term financial gains (Yeow & Ng, 2021 ). A financial implication for companies is the need to manage costs associated with equity funding and expenses related to sustainability programs. While issuing green bonds can enhance the firm's reputation and attract socially conscious investors, an increase in the cost of shares may impact the firm's capital structure. Companies should align their cost of equity with their strategic objectives by effectively communicating the long-term benefits of their sustainability efforts to investors and attracting a diverse range of investors who share similar values (Vaupel et al., 2023 ). CSR expenditures also exhibited a positive and significant effect on the cost of equity, supporting the study's hypothesis. These results are consistent with RBV theory, which indicates that unique resources, such as CSR investments, can influence a firm's financial framework, including its stock price (Hussain et al., 2023 ). This theory is further substantiated by the positive impact of these expenditures on stock issuance costs, as the market views CSR activities as a reflection of a company's commitment to sustainability. Despite the premium investors demand for sustainability-focused investments, CSR activities can improve a firm's reputation, attract a broader range of investors, and increase share demand (Koltonuk, 2020 ). This rationale clarifies the positive relationship between CSR and sustainable initiatives, which provide societal and environmental benefits but also present risks that may affect returns. Investors may view CSR expenditures as a sign that the corporation is making substantial commitments to these initiatives (Agliardi & Agliardi, 2021 ). To alleviate the perceived risks linked to these investments, they may seek higher returns on equity. Moreover, the long-term nature of CSR investments may lead stock investors to request greater returns, favoring long-term sustainability over short-term financial profits (Hadaś-Dyduch et al., 2022 ). One financial implication for companies is the necessity to balance equity funding costs with expenses related to their sustainability programs. While issuing green bonds can bolster a firm's reputation and draw in socially conscious investors, an increase in share costs may affect the firm's capital structure. Companies should synchronize their cost of equity with their overarching strategic objectives by effectively communicating the long-term benefits of their sustainability initiatives to investors and appealing to a broader investor base (Jing et al., 2023 ). This study found that sustainability-linked loans had a positive and significant impact on the cost of equity, confirming the study's hypothesis. Specifically, the results indicate that sustainability-linked loans serve as strategic assets that can significantly influence a company's financial framework, particularly the cost of equity (Morrone et al., 2022 ). These findings align with RBV theory, which asserts that sustainability-linked loans positively affect equity costs. The positive impact arises from the market's assessment of these loans as a pathway for sustained growth and potential financial obligations that carry uncertainties, affecting the firm's equity expenses (Brunnermeier & Krishnamurthy, 2020 ). The presence of sustainability-related performance targets in sustainability-linked loans accounts for the observed positive relationship. While these loans offer societal and environmental benefits, they also present operational challenges and risks. Given the ambitious nature of these goals, investors may harbor increasing concerns about the company's ability to generate future profits, prompting them to seek higher returns on equity. Investors are inclined to support sustainability-focused projects in exchange for a greater return on investment (Christensen et al., 2022 ), a prudent choice given the long-term commitment and inherent risks associated with such investments. An economic implication of these findings suggests that companies must evaluate sustainability-linked loans for alignment with their overall financial strategies regarding terms and objectives. While these loans can elevate share prices and potentially impact profitability, they can also enhance a company's sustainability credentials and attract ethical investors. Firms should strive to demonstrate the financial advantages and enduring value of achieving sustainability goals (Tseng, 2021 ) to mitigate the effects of rising equity costs associated with these loans. The study revealed a positive and significant relationship between investments in renewable energy and the cost of equity, supporting the hypothesis. These findings align with RBV theory, which posits that investing in renewable energy as a strategic resource can significantly impact a company's financial structure, specifically its cost of equity (Dionysus & Arifin, 2020 ). Despite the potential for these investments to enhance sustainability and long-term competitive advantage, investors may exhibit greater risk aversion and consequently demand higher prices for shares. A key reason for this positive relationship is that investments in renewable energy often entail substantial initial costs and long payback periods, complicating cash flow projections (Zimon & Zimon, 2020 ). The anticipated risks associated with these long-term investments, stemming from inherent uncertainties, may lead investors to expect higher returns on shares. Additionally, the regulatory and technical risks linked to renewable energy projects may contribute to perceptions of heightened risk, further increasing the cost of equity (Hoang et al., 2021 ). An important financial consideration for corporations is the need to balance the benefits of investing in renewable energy against the potential for higher equity costs. While these investments can establish the company as a leader in sustainability and generate additional revenue, the rising cost of equity associated with them may ultimately diminish profitability over time. To address this issue, companies should highlight the substantial long-term strategic advantages of investing in renewable energy, such as cost savings, regulatory benefits, and improved market positioning, to persuade investors to accept higher equity costs in the future (Chen & Ma, 2021 ). The study found that the moderating relationship between green bond issuance and the size and age of the firm had a positive and significant impact on the cost of equity. Consistent with RBV theory, these findings suggest that green bond issuance can positively influence the cost of equity, provided that the firm's age and size moderate this effect. This discovery offers evidence that green bonds are valuable tools for strategic planning (Bhutta et al., 2022 ). However, the effectiveness of these instruments in reducing financial costs may depend on the company's size and age, potentially leading to higher equity costs. Investors often perceive larger, more established organizations as less agile and more risk-averse despite their stability, which explains the favorable association. Sustainability initiatives, such as green bonds, are particularly affected by this perception. As a result, these findings may elevate stock prices, as investors are willing to pay more for a company that demonstrates adaptability and innovation. For established firms, issuing green bonds may signify a significant strategic shift, diverging from conventional business practices (Perkins, 2021 ), which could further increase stock prices and perceived risks. Issuing green bonds, especially for large corporations, necessitates careful consideration of the economic impacts of managing investor perceptions. While these bonds can enhance a company's sustainability and provide additional financing opportunities, rising stock prices may offset some financial benefits. To address this challenge, companies should emphasize their commitment to green bond initiatives in their long-term strategies (Torvanger et al., 2021 ). Highlighting these bonds can inspire future innovation and growth while reassuring investors of the company's capacity to thrive in a sustainable market. The effect of investment in sustainable finance on WACC This study found that green bonds have a positive and significant influence on the WACC, supporting the study's hypothesis. The RBV theory suggests that green bonds act as valuable assets that can enhance a company's financial position (Chen, 2024 ). By optimally leveraging these bonds, firms can decrease their cost of capital and strengthen their capital structure. Implementing this strategy improves financial stability, promotes sustained growth, and cultivates investor trust. Due to their appeal to investors who value sustainability, green bonds often lead to reduced financing costs for firms, contributing to a positive relationship. In a market with high demand for green assets, firms can lower their overall cost of capital by issuing bonds that offer attractive interest rates (Bhutta et al., 2022 ). Corporations that issue green bonds may gain positive publicity for their progressive and environmentally conscious stance. Increased investor confidence and a reduction in perceived risk may lead to a decline in WACC due to this enhanced reputation. Based on these findings, the economic implication suggests that companies will be better positioned to invest in sustainable projects and development opportunities at a lower cost due to decreased WACC. This will facilitate their ability to finance projects more easily, resulting in enhanced financial performance and a competitive edge in the market. Furthermore, by attracting a broader range of investors who prioritize ESG factors, companies can strengthen their market position and enhance their prospects for sustained expansion (Wei & Chengshu, 2024 ). The issuance of green bonds can accomplish this, positioning the company as a leader in sustainability. CSR expenditures were found to have a positive and significant effect on WACC, further supporting the study's hypothesis. This research aligns with the well-established claim of the RBV theory that CSR activities are crucial for developing an organization's intangible assets, such as its reputation and stakeholder trust (Salam & Jahed, 2023 ). These enhancements can lead to favorable financing terms and overall financial performance, substantially impacting capital expenditures and reducing perceived risk for investors and creditors. Prioritizing CSR improves market position and ensures long-term viability. Organizations that allocate resources to CSR often experience decreased operational risk, highlighting its beneficial effects. Creditors and investors generally view a corporation's commitment to social responsibility positively, potentially resulting in diminished returns on invested capital and loans (Attig, 2024 ). Effective CSR programs can reduce WACC, improve cash flow stability, and generate operational improvements and cost reductions. Business enterprises can dedicate more resources to innovation and growth due to the decreased financing costs associated with a lower WACC. The company's financial flexibility enables it to actively pursue strategic initiatives aligned with its CSR goals, further strengthening its competitive edge (Samans & Nelson, 2022 ). Moreover, by enhancing social and environmental performance through CSR investments, companies can attract investors who prioritize sustainability, expanding their investor base and enhancing long-term viability and profitability. This study observed a positive and significant relationship between sustainability-linked loans and WACC, supporting the study's hypothesis. The findings corroborate the RBV theory, which posits that a firm's resources significantly improve with access to sustainable finance (Hussain et al., 2023 ). This level of access empowers organizations to launch significant projects that create enduring value. By employing sustainable financial decisions, corporate entities can achieve a more robust competitive edge, improved operational effectiveness, and better resource allocation towards innovative initiatives. This strategic alignment with sustainable practices collectively enhances the company's resilience and growth. These sustainability-linked loans may include incentives for achieving specific social or environmental performance goals, which could explain the positive relationship between the two. By mitigating perceived risk and lowering capital expenditures, a company's commitment to sustainability can improve its reputation and strengthen relationships with key stakeholders (Landi et al., 2022 ). Firms achieving these sustainability goals may also qualify for enhanced financing conditions, further decreasing their WACC. The results of this study have economic implications for firms, suggesting that a lower WACC facilitates funding for new investments and projects, allowing them to pursue innovative initiatives that prioritize sustainability. By integrating sustainability activities into their financial strategies, companies can broaden their potential investor base by attracting socially aware individuals and groups (Panagopoulos & Tzionas, 2023 ). Implementing this approach not only improves financial performance but also establishes the company as a leader in sustainability, potentially increasing its market share and profitability. The study revealed that investment in renewable energy had a positive and significant impact on WACC, supporting the study's hypothesis. These findings align with the RBV theory, which suggests that strategic investments in sustainable resources can significantly enhance a firm's competitive advantage (Tan et al., 2022 ). Prioritizing sustainability enables organizations to reduce capital expenditures, attract socially responsible investors, and improve operational efficiency. By prioritizing sustainable resources, companies can foster enduring economic success and strategically position themselves in their markets, enabling them to adapt seamlessly to changing consumer preferences and regulatory requirements. Allocating resources to renewable energy projects yields positive outcomes for a company's sustainability reputation, appealing to socially responsible investors (Camilleri, 2021 ). Increased demand for the company's shares may lead to a decrease in WACC and a reduction in the cost of equity. Corporations that invest in renewable energy sources may be eligible for government subsidies and incentives, leading to increased cash flow and reduced financing expenses, further contributing to a lower WACC. These findings have significant economic implications for enterprises, suggesting that a lower WACC encourages companies to allocate resources toward capital-intensive projects, fostering innovation and economic expansion in emerging markets. By investing in renewable energy, enterprises can protect themselves against fluctuations in fossil fuel prices and comply with climate change requirements (Zhao et al., 2024 ). This approach serves a dual purpose: it preserves the company's financial solvency while providing a competitive advantage in an increasingly environmentally conscious market. This study also revealed that the moderating relationship between the issuance of green bonds and a firm's size and age has a positive and significant impact on WACC. The findings support the RBV theory, which posits that a firm's financial success is significantly influenced by its unique resources and capabilities. The maturity and size of a corporation substantially affect its ability to utilize these resources efficiently. Larger, more established firms benefit from greater access to intangible assets, such as brand recognition and industry expertise, providing them with a competitive advantage in the market and leading to stronger financial results (Iriyanto et al., 2021 ). Smaller companies may lack the financial resources of established firms, requiring them to demonstrate innovation and develop creative strategies to compete effectively. This perspective argues that an organization's size and longevity are crucial elements in the development and preservation of its most important resources, ultimately enhancing its long-term performance. One factor contributing to this positive result is the ability of larger firms to leverage their scale when negotiating prices for green bonds. Investors may perceive a company as riskier due to its size and maturity, potentially increasing its WACC (Franc-Dąbrowska et al., 2021 ). Companies with a longer history may possess greater credibility, which is beneficial for issuing green bonds. However, they may also face challenges in adapting to new sustainable standards, which could increase their capital expenditures. These findings have economic implications for firms, suggesting that they may raise the threshold rate for acceptable investments, complicating their ability to invest in new projects or expand existing operations. The reluctance of enterprises to adopt ecological initiatives could undermine their long-term sustainability and growth prospects. Optimal management of these relationships can provide firms with a competitive edge in a market that prioritizes sustainability (Kumar et al., 2022 ). Adopting this strategy enhances their financial performance, establishes a favorable market position, and appeals to environmentally conscious investors. Dealing with endogeneity and assessing the GMM model’s validity After meticulously detecting endogeneity using the Durbin-Wu-Hausman (DWH) tests, systematic steps were taken to address the issue. The first step involved including dependent variables as independent dynamic variables in the regression analysis, which helped eliminate the presence of endogeneity among the independent variables. In the second step, we lagged all independent variables deemed endogenous, employing internal instrumental variables to resolve the endogeneity issues. This approach significantly enhances current predictions by reducing biases from unobserved shocks, leading to more reliable and robust outcomes. In the third step, we introduced external instrumental variables, such as total fixed assets, research and development expenditures, capital expenditures, and brand values, into the model, addressing the endogeneity concern. This introduction of exogenous instruments substantially improved the robustness of our regression model. A range of measurement indices was used to determine the validity of the GMM model results. The first index employed was the Arellano-Bond test, where AR(1) is statistically significant and AR(2) is statistically insignificant, indicating the validity of the GMM model results. Additionally, the AR(2) results show no serial correlation (Mensah et al., 2024 ). The Sargan test was conducted to assess whether the instrumental variables introduced into the model were exogenous or endogenous. The statistically insignificant results from the Sargan tests indicate that the instrumental variables are exogenous, a finding consistent across all models. The Hansen J-test provides evidence that the instruments do not have a strong or perfect relationship with the error terms. The Hansen tests yielded statistically insignificant results, which fall between the thresholds of 0.10 and 0.30 (Roodman, 2009 ). Hansen test results below the threshold of 0.10 and above the threshold of 0.30 suggest the overall invalidity of the GMM model results. Table 7 Two-step GMM (Difference GMM) Cost of debt Cost of equity WACC Variables Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Model 1 Model 2 Model 3 Dependent variables (-1) 0.605 *** (0.011) 0.602 *** (0.012) 0.591 *** (0.014) 0.148 *** (0.011) 0.142 *** (0.011) 0.147 *** (0.011) 0.486 *** (0.011) 0.485 *** (0.011) 0.486 *** (0.011) Green bond issued 0.327 *** (0.090) 0.241 *** (0.093) 0.284 *** (0.114) 0.182 *** (0.061) 0.282 *** (0.173) 0.196 *** (0.043) 0.728 *** (0.116) 0.813 *** (0.117) 0.795 *** (0.126) CSR expenditures 0.713 *** (0.239) 0.135 *** (0.023) 0.305 * (0.113) 0.505 *** (0.202) 0.161 *** (0.021) 0.120 *** (0.031) 0.165 *** (0.032) 0.214 *** (0.046) 0.065 *** (0.023) Sustainability linked loans -0.331 *** (0.049) -0.318 *** (0.050) -0.293 *** (0.056) 0.394 *** (0.076) 0.396 *** (0.080) 0.379 *** (0.078) 0.610 *** (0.073) 0.872 *** (0.073) 0.523 *** (0.072) Investment in renewable energy 0.525 *** (0.056) 0.502 *** (0.058) 0.571 *** (0.072) 0.412 *** (0.081) 0.443 *** (0.088) 0.417 *** (0.091) 0.852 *** (0.075) 0.872 *** (0.073) 0.899 *** (0.081) Firm age 0.047 *** (0.008) 0.079 *** (0.028) 0.053 *** (0.008) 0.516 *** (0.078) 0.167 *** (0.021) 0.487 *** (0.080) 0.068 *** (0.009) 0.025 *** (0.003) 0.063 *** (0.009) Firm size -0.432 *** (0.090) -0.467 *** (0.090) -0.552 *** (0.132) 0.449 *** (0.103) 0.750 *** (0.239) 0.219 *** (0.048) 0.707 *** (0.107) 0.717 *** (0.107) 0.678 *** (0.134) Leverage 0.473 *** (0.102) 0.483 *** (0.009) 0.489 *** (0.105) 0.209 *** (0.005) 0.283 *** (0.006) 0.226 *** (0.005) 0.009 *** (0.001) 0.008 *** (0.001) 0.008 *** (0.001) Green bond * Age -0.377 *** (0.045) 0.808 *** (0.335) 0.523 ** (0.247) Green bond * Size 0.704 *** (0.179) 0.358 *** (0.092) 0.833 *** (0.182) Number of observations 3632 3632 3632 3632 3632 3632 3632 3632 3632 AR (1) 0.005 0.003 0.001 0.000 0.000 0.000 0.012 0.021 0.019 AR (2) 0.534 0.562 0.589 0.623 0.642 0.668 0.813 0.834 0.845 Sargan test 0.333 0.356 0.332 0.578 0.601 0.689 0.500 0.555 0.599 Hansen test 0.129 0.135 0.142 0.179 0.185 0.193 0.230 0.256 0.287 *** p < .01, ** p < .05, * p < .1 After addressing all endogeneity issues, the robustness of the results presented in Table 6 was further demonstrated using the findings from Table 7 . The notable differences between the results in Table 7 and those in Table 6 were observed in the estimated coefficients for the variables and their standard errors. Nevertheless, the results in Table 6 align with those in Table 7 concerning the negative or positive significance between the dependent and independent variables. The consistent results across Tables 6 and 7 confirm the robustness of the findings. Conclusion The study examined the impact of investment in sustainable finance on the cost of capital. The selection of companies adhered to rigorous inclusion criteria, and a purposive sampling strategy was employed to collect 18 years of data from 227 companies listed on the London Stock Exchange between 2006 and 2023, sourced from Thomson Reuters Eikon DataStream. The CCMG and two-step GMM estimation methods, known for their accuracy, were utilized for data analysis, ensuring the thoroughness and reliability of the findings. The study found that the issuance of green bonds, CSR expenditures, and investments in renewable energy had a positive and significant impact on the cost of debt, cost of equity, and WACC. In contrast, sustainable-linked loans had a negative and significant impact on the cost of debt, while a positive and significant impact was observed on the cost of equity and WACC. Additionally, the moderating relationship between the firm’s age and the issuance of green bonds had a positive and significant effect on the cost of debt, cost of equity, and WACC. Managerial implication Green bonds, a valuable tool for raising funds, can significantly impact interest rates and reduce financing costs. By demonstrating transparency in the environmental benefits and capital allocation of these bonds, corporations can enhance their appeal to socially conscious investors. Establishing a transparent issuance process and a robust reporting framework for the environmental impact of bond-funded projects is crucial to instilling investor confidence. Allocating capital toward CSR projects can help reduce the cost of equity. To enhance their brand reputation and attract investment, corporations should focus on sustainability projects that resonate with their stakeholders. Integrating CSR into the company’s comprehensive business plan and ensuring stakeholders are well-informed about its CSR activities and achievements are effective approaches. The significant multiplier effect of this phenomenon on investment confidence and customer loyalty underscores the vital role of stakeholder engagement in the process. Sustainability-linked loans, which are positively correlated with equity costs, can serve as a strategic tool for firms to align their financial strategies with sustainability goals. Businesses seeking more favorable financing terms should explore financial institutions offering such loans and ensure they meet all sustainability criteria. Setting specific sustainability targets that, when met, lead to lower interest rates is an effective way to align financial performance with environmental impact. Investing in renewable energy is imperative for effectively controlling WACC and overall financial risk. Enterprises should thoroughly examine potential renewable energy projects to ensure the soundness of their investment decisions. This includes collaborating with energy experts to implement economically viable solutions. By broadening their energy portfolios and reducing their vulnerability to regulatory uncertainty and energy price volatility, enterprises can achieve their sustainability goals and secure their financial future. Integrating sustainability into firms’ operational and financial objectives on the London Stock Exchange is essential. Implementing this strategy will strengthen their market position, enhance long-term profitability, and increase shareholder value. Limitation of the study Insufficient data availability prevented some companies from meeting the inclusion criteria. Data for the non-financial companies listed on the London Stock Exchange was obtained from Eikon DataStream. Ultimately, the sample size for this study comprised 227 companies, resulting from a meticulous data-cleaning procedure that eliminated companies with incomplete or missing data. This study aimed to address previously overlooked gaps in the literature. However, the limited number of studies in the same topic areas made it impractical to directly compare the findings with previous research. The academic literature review was critically examined to obtain essential information, and a theoretical framework was employed to elucidate the findings of this study. Declarations Data Availability The data associated with the study will be made available upon reasonable request from the corresponding author. Ethical approval This article does not contain any studies with human participants performed by any of the authors Informed consent This article does not contain any studies with human participants performed by any of the authors Competing interests The authors declare that they have no competing interests Funding Not applicable Author Contribution ROA: Conceptualization, writing – review & editing, Writing – original draft, Visualization, Validation, Software, Resources, Project administration. LM: writing – review & editing, Writing – original draft Methodology, Investigation, Formal analysis. HIMA: writing – review & editing, Writing – original draft, Data curation, Conceptualization. HAO: Writing – original draft, Investigation, Data curation, Conceptualization, Methodology, Supervision. 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Corporations typically raise funds through debt, equity, or a combination of both. The cost of capital reflects the potential financial loss of another project with a comparable risk level. Investors expect a minimum profit in exchange for financing an endeavor, making the cost of capital a critical factor in corporate funding and decision-making (Vernimmen et al., \u003cspan citationid=\"CR108\" class=\"CitationRef\"\u003e2022\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eA high cost of capital indicates increased risk, which in turn necessitates a higher return to compensate for that risk (Vitolla et al., \u003cspan citationid=\"CR109\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). This situation can increase borrowing costs or reduce a firm\u0026rsquo;s ability to issue shares. Consequently, a high cost of capital may restrict a company\u0026rsquo;s capacity to invest in new projects, expand its operations, or explore growth opportunities (Lerner \u0026amp; Nanda, \u003cspan citationid=\"CR62\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). Investments must generate returns that exceed the cost of capital. In some cases, a high cost of capital can push companies to prioritize short-term financial gains over long-term strategic objectives to satisfy investors (Siegel, \u003cspan citationid=\"CR95\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eConversely, a lower cost of capital suggests that investors view the business as less risky, enabling it to secure loans at lower interest rates (Franc-Dąbrowska et al., \u003cspan citationid=\"CR36\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). This increased financial flexibility allows the company to invest in strategic activities that may yield lower immediate returns but contribute to long-term growth. Additionally, a lower cost of capital can enhance competitiveness by enabling a firm to fund operations and expansions more cost-effectively than its competitors, leading to increased profitability and market share (Arhinful et al., \u003cspan citationid=\"CR12\" class=\"CitationRef\"\u003e2024\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe cost of capital directly influences business decisions such as capital budgeting, project evaluation, and financial planning (Siziba \u0026amp; Hall, \u003cspan citationid=\"CR96\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Companies assess the feasibility of new investments by comparing the expected returns against the cost of capital. If the anticipated return exceeds the cost of capital, the investment is typically considered justified, as it is expected to increase the firm\u0026rsquo;s value. Conversely, if the projected return falls below the cost of capital, the project may be rejected due to the potential negative impact on the company\u0026rsquo;s overall worth (Eun et al., \u003cspan citationid=\"CR34\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eSustainable finance integrates financial decisions with environmental, social, and governance (ESG) considerations (Li et al., \u003cspan citationid=\"CR63\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). It involves allocating funds to projects that promote sustainability, such as renewable energy, social development, and ethical practices, while still aiming for profitability. Sustainable finance aligns financial goals with broader societal and environmental objectives to support long-term, equitable economic growth (Ziolo et al., \u003cspan citationid=\"CR123\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eInvestments in sustainable finance can reduce the cost of capital. Companies that adopt sustainable finance practices often experience lower borrowing costs (Setyowati, \u003cspan citationid=\"CR92\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). Such companies attract a broader range of investors, especially those prioritizing ESG factors. As the demand for securities from sustainable firms increases, the cost of equity may decline due to heightened investor interest (Wang et al., \u003cspan citationid=\"CR111\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eLenders and investors often perceive firms with strong ESG practices as having lower risk profiles. Such perceptions can lead to more favorable financing terms, such as lower interest rates for loans (Abrantes \u0026amp; Str\u0026ouml;m, \u003cspan citationid=\"CR1\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). This reduced risk perception makes capital more affordable. Companies involved in sustainable finance may also benefit from specific financial instruments, such as sustainability-linked loans or green bonds, which typically offer more favorable terms than traditional financing options (Driessen, \u003cspan citationid=\"CR30\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). These instruments are designed to support projects with positive societal or environmental impacts and often include lower interest rates or additional benefits that further decrease the company\u0026rsquo;s cost of capital.\u003c/p\u003e\u003cp\u003eReducing the cost of capital can significantly benefit a firm by enabling it to finance growth and innovation, allocate resources to strategic initiatives, and improve its competitive position (Onileowo et al., \u003cspan citationid=\"CR78\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Moreover, companies committed to sustainable finance can enhance their reputations, attract new investors, and build stronger relationships with stakeholders, promoting long-term success and resilience (Newmark \u0026amp; Pena, \u003cspan citationid=\"CR77\" class=\"CitationRef\"\u003e2023\u003c/span\u003e; Arnell, \u003cspan citationid=\"CR13\" class=\"CitationRef\"\u003e2022\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eDespite growing research interest, gaps remain in the literature regarding the effect of sustainable finance investments on the cost of capital. While a study has examined the impact of green bond issuance on the cost of capital (Zhang et al., \u003cspan citationid=\"CR119\" class=\"CitationRef\"\u003e2021\u003c/span\u003e), it did not apply the definitions and measures typically used in corporate finance and financial management literature. This oversight could mislead firms operating in capital markets and using debt and equity to finance their operations. Moreover, this study did not analyze the impact of sustainable finance on the cost of debt, equity, and weighted average cost of capital (WACC), which are crucial measurements of the cost of capital. Additionally, the literature lacks research on how corporate social responsibility (CSR) expenditures, investments in renewable energy, and sustainability-linked loans influence the cost of capital, particularly the cost of debt, equity, and WACC, highlighting a knowledge gap.\u003c/p\u003e\u003cp\u003eCompany characteristics such as age and size can affect investment in sustainable finance. Larger and more established firms have greater resources and face greater scrutiny, enabling and compelling them to invest in sustainability. Smaller or newer companies may struggle with limited resources but may also emphasize sustainability to differentiate themselves and attract ESG-focused investors. However, the literature has not examined how a firm\u0026rsquo;s age and size moderate the relationship between green bond issuance, CSR expenditure, and the cost of capital.\u003c/p\u003e\u003cp\u003eThis study aims to address these gaps and contribute to the existing literature by investigating the impact of green bond issuance on the cost of capital. By addressing this gap, the study can reveal how green bonds influence capital costs, providing financial benefits to firms and encouraging greater investment in environmentally sustainable projects. If green bonds reduce capital costs, they may incentivize corporations to allocate more funds to eco-friendly initiatives, supporting environmental goals while reducing funding costs.\u003c/p\u003e\u003cp\u003eThis study also examines how CSR expenditures impact the cost of capital. Filling this gap is essential as it can show whether firms engaged in CSR activities benefit from lower financing costs. Financial advantages can encourage companies to increase their CSR investments, which can enhance brand image, strengthen stakeholder relationships, and further reduce capital costs. Addressing this gap can help companies fulfill their societal obligations and lead to more sustainable and profitable business strategies.\u003c/p\u003e\u003cp\u003eFurthermore, the study explores the effect of sustainability-linked loans on the cost of capital. Understanding this relationship is crucial as it may reveal how effective these loans are in motivating firms to achieve sustainability objectives through financial rewards. If these loans lower capital costs, more firms might pursue ambitious sustainability goals, knowing that doing so could lead to reduced financing expenses. Such outcomes can promote ethical business practices and support broader environmental and social goals.\u003c/p\u003e\u003cp\u003eThe research also investigates the impact of investments in renewable energy on the cost of capital. Addressing this gap is vital as it could influence how investors perceive firms allocating resources to renewable energy, leading to lower financial risks and reduced financing costs. These potential economic benefits could motivate companies to invest more in renewable energy initiatives, accelerating the transition to sustainable energy sources. Insights from this study can also inform policy decisions to encourage greater business investment in renewable energy, thereby supporting global efforts to combat climate change.\u003c/p\u003e\u003cp\u003eLastly, the study analyzes the moderating role of firm age and size on the relationship between green bond issuance and the cost of capital. Older and larger companies may benefit from stronger brand reputations and financial stability, which can result in lower borrowing costs. Conversely, smaller or younger firms may face higher financing costs due to perceived risks. Understanding this dynamic can help firms optimize their financing and capital structure decisions, depending on their characteristics.\u003c/p\u003e"},{"header":"Literature review and hypothesis development","content":"\u003cp\u003e\u003cb\u003eTheoretical perspective.\u003c/b\u003e\u003c/p\u003e\u003cp\u003eThe stakeholder theory, signalling theory, and resource-based view (RBV) theory have been widely used to examine how sustainable finance investments influence key performance indicators (KPIs). According to stakeholder theory, companies should consider the interests and concerns of all relevant parties when making decisions, rather than focusing solely on shareholders (Mensah \u0026amp; Bein, \u003cspan citationid=\"CR73\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). Implementing sustainable finance strategies can strengthen relationships with stakeholders, potentially lowering the cost of capital. However, stakeholder theory\u0026rsquo;s broad scope makes it challenging to isolate the specific impact of financial strategies like sustainable financing on the cost of capital. Additionally, the theory does not offer detailed strategies to explain how stakeholder engagement translates into financial benefits. Therefore, it may not be the most suitable framework for this study, which requires a more targeted financial approach.\u003c/p\u003e\u003cp\u003eSignalling theory suggests that organizations convey information about their quality and risk to the market through their actions, such as participating in sustainable financing initiatives (Wang \u0026amp; Hussin, \u003cspan citationid=\"CR112\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). By engaging in sustainable finance projects, a company can signal its commitment to long-term sustainability, thereby reducing perceived risk and potentially lowering capital costs. While signalling theory establishes a link between sustainable finance and the cost of capital, it does not sufficiently address the internal resources and competencies needed to maintain a competitive advantage. Moreover, the theory places excessive emphasis on market perceptions and reactions. This reliance on external signals can be problematic, as market perceptions may not always accurately reflect an organization\u0026rsquo;s actual sustainability efforts or underlying value (Baier et al., \u003cspan citationid=\"CR15\" class=\"CitationRef\"\u003e2022\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe RBV theory is the most appropriate framework for explaining how sustainable finance investments affect the cost of capital. RBV theory argues that a company's unique assets and capabilities are key factors that provide it with a competitive advantage (Lubis, \u003cspan citationid=\"CR68\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). In the context of sustainable finance, the theory suggests that companies that engage in sustainable investments possess valuable, rare, and inimitable resources, which can lower their cost of capital (Aliane et al., \u003cspan citationid=\"CR3\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). Such investments can enhance a firm\u0026rsquo;s reputation, operational performance, and risk management capabilities\u0026mdash;factors that are crucial for reducing borrowing costs. RBV theory focuses on a company's internal capabilities that contribute to its financial performance.\u003c/p\u003e\u003cp\u003eRBV theory further posits that a company\u0026rsquo;s competitive advantage arises from its distinct resources and capabilities, which are valuable, rare, unique, and non-substitutable (Aliane et al., \u003cspan citationid=\"CR3\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). For example, green bonds are an effective financial instrument that can bolster a company\u0026rsquo;s reputation and demonstrate its commitment to sustainability. By issuing green bonds, a firm signals its support for global environmental goals, making its securities more attractive to investors (Yeow \u0026amp; Ng, \u003cspan citationid=\"CR117\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). According to the RBV theory, organizations can secure advantageous financing arrangements and reduce borrowing costs by leveraging distinctive resources such as green bonds.\u003c/p\u003e\u003cp\u003eIn line with RBV theory, CSR expenditure is viewed as a strategic investment in intangible assets, such as stakeholder trust and corporate reputation, which are valuable resources (Lin, \u003cspan citationid=\"CR66\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). Companies that allocate financial resources to CSR initiatives showcase their dedication to societal and environmental betterment, increasing their appeal to investors. This approach aligns with the RBV theory, which emphasizes the development of unique attributes that decrease perceived risk and thus lower capital costs (Maiti et al., \u003cspan citationid=\"CR69\" class=\"CitationRef\"\u003e2020\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eSustainability-linked loans offer a competitive advantage by linking financial performance to specific sustainability criteria. The RBV theory suggests that these loans strengthen a company\u0026rsquo;s commitment to sustainability as a core capability while also providing immediate financial benefits such as lower interest rates (Tan et al., \u003cspan citationid=\"CR102\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Tying financial incentives to environmentally friendly actions creates a valuable and scarce asset that simultaneously reduces the cost of capital.\u003c/p\u003e\u003cp\u003eInvestments in renewable energy, such as infrastructure and specialized expertise, create unique resources that are difficult for competitors to replicate (Hartmann et al., \u003cspan citationid=\"CR40\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). According to RBV theory, companies can lower their cost of capital by developing distinct resources that improve operational efficiency and enhance their risk profile.\u003c/p\u003e\u003cp\u003eWell-established firms with greater resources and expertise can effectively implement sustainable finance strategies to reduce their cost of capital. However, according to RBV theory, even newer and smaller firms can gain a competitive edge if they successfully create and leverage unique resources, such as innovative sustainability initiatives (Sulaeman \u0026amp; Kusnandar, \u003cspan citationid=\"CR99\" class=\"CitationRef\"\u003e2020\u003c/span\u003e).\u003c/p\u003e\u003cdiv id=\"Sec3\" class=\"Section2\"\u003e\u003ch2\u003eHypothesis Development\u003c/h2\u003e\u003cp\u003eThe conceptual framework of this study is presented in Fig.\u0026nbsp;\u003cspan refid=\"Fig1\" class=\"InternalRef\"\u003e1\u003c/span\u003e.\u003c/p\u003e\n\u003ch3\u003eThe Influence of green bonds issue on the cost of capital\u003c/h3\u003e\n\u003cp\u003eGreen bonds can influence a company\u0026rsquo;s cost of equity by enhancing its reputation and demonstrating a commitment to sustainability (Bhutta et al., \u003cspan citationid=\"CR16\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). This positive signal can attract investors who prioritize social responsibility, thereby lowering the required rate of return on the company\u0026rsquo;s stock. Maltais and Nykvist (\u003cspan citationid=\"CR70\" class=\"CitationRef\"\u003e2020\u003c/span\u003e) found that companies issuing green bonds experience a reduction in their equity costs due to increased investor interest in sustainable projects. Their findings suggest that issuing green bonds generally leads to a reduction in equity risk premiums, indicating a decline in the overall cost of equity.\u003c/p\u003e\u003cp\u003eGreen bonds can also affect the cost of borrowing. Typically, green bonds have lower interest rates compared to conventional bonds. Investors are often willing to accept lower returns in exchange for the positive environmental impact and perceived reduced risk associated with the issuer\u0026rsquo;s commitment to sustainability (Maltais \u0026amp; Nykvist, \u003cspan citationid=\"CR70\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). Teti et al. (\u003cspan citationid=\"CR103\" class=\"CitationRef\"\u003e2022\u003c/span\u003e) found that green bonds usually exhibit narrower spreads compared to government bonds. This suggests that companies issuing green bonds benefit from lower borrowing costs due to the market\u0026rsquo;s recognition and reward of their sustainable activities, resulting in reduced interest rates.\u003c/p\u003e\u003cp\u003eThe issuance of green bonds can also impact the weighted average cost of capital (WACC) by altering both equity and debt costs. Green bonds often lead to cost reductions in both areas, which in turn lowers a company\u0026rsquo;s overall WACC (Zhang et al., \u003cspan citationid=\"CR119\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Eriksson and Heinrichs (\u003cspan citationid=\"CR32\" class=\"CitationRef\"\u003e2022\u003c/span\u003e) found that firms issuing green bonds have a lower WACC due to the combined effect of reduced borrowing and equity costs, highlighting the financial advantages of adopting sustainable and environmentally friendly investment strategies. Based on this discussion, the following hypothesis is proposed:\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eH1\u003c/strong\u003e\u003cp\u003eThe issuance of green bonds has a positive and significant influence on the cost of capital.\u003c/p\u003e\u003c/p\u003e\n\u003ch3\u003eThe Influence of CSR expenditures on the cost of capital\u003c/h3\u003e\n\u003cp\u003eInvesting in CSR can affect a company's stock price by enhancing its reputation and lowering investors' perceived risk (Lu et al., \u003cspan citationid=\"CR67\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Companies that engage in substantial CSR initiatives improve investor perceptions, which may reduce the equity risk premium demanded by shareholders. Dahiya and Singh (\u003cspan citationid=\"CR27\" class=\"CitationRef\"\u003e2021\u003c/span\u003e) found a positive relationship between increased CSR expenditure and a decrease in the cost of equity. This suggests that companies investing in CSR boost investor confidence, leading to a lower perceived risk and, consequently, a reduced required return on equity.\u003c/p\u003e\u003cp\u003eInvesting in CSR can also reduce borrowing costs by improving the company\u0026rsquo;s creditworthiness and risk profile (Boubaker et al., \u003cspan citationid=\"CR18\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). Financial institutions often view firms with strong CSR commitments as less risky, resulting in more favorable lending terms and lower interest rates. Khan et al. (\u003cspan citationid=\"CR52\" class=\"CitationRef\"\u003e2021\u003c/span\u003e) found that companies actively engaged in CSR are more likely to secure loans at lower interest rates. By implementing CSR initiatives, these firms enhance their risk profiles, making it easier to obtain loans at reduced interest rates and a lower credit risk premium.\u003c/p\u003e\u003cp\u003eCSR investments can influence the WACC by reducing both the cost of debt and the cost of equity. Companies that invest in CSR may experience a lower WACC due to reductions in both components (AlKhouri \u0026amp; Suwaidan, \u003cspan citationid=\"CR4\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). For example, Mariani et al. (\u003cspan citationid=\"CR72\" class=\"CitationRef\"\u003e2021\u003c/span\u003e) found that firms allocating substantial resources to CSR activities tend to see a decrease in their WACC, attributed to lower borrowing costs from improved creditworthiness and reduced equity costs from increased investor confidence. These findings highlight the financial benefits of robust CSR practices. Based on this discussion, the following hypothesis is proposed:\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eH2\u003c/strong\u003e\u003cp\u003eCSR expenditures have a positive and significant impact on the cost of capital.\u003c/p\u003e\u003c/p\u003e\u003cp\u003e\u003cb\u003eThe Influence of Sustainability linked loans on the cost of capital\u003c/b\u003e.\u003c/p\u003e\u003cp\u003eSustainability-linked loans can enhance a company\u0026rsquo;s reputation and investor perception, thereby affecting the cost of equity. By tying interest rates to specific sustainability benchmarks, these loans signal to investors that the company is committed to achieving long-term social and environmental goals (Liang \u0026amp; Renneboog, \u003cspan citationid=\"CR64\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). This signal can increase investor trust and reduce uncertainty about the company\u0026rsquo;s investments. Du et al. (\u003cspan citationid=\"CR31\" class=\"CitationRef\"\u003e2023\u003c/span\u003e) found that firms with strong sustainability practices\u0026mdash;often demonstrated through sustainability-linked loans\u0026mdash;tend to have lower equity costs. This may be due to heightened investor confidence and interest in companies that demonstrate a consistent commitment to sustainable practices.\u003c/p\u003e\u003cp\u003eSustainability-linked loans can also lower borrowing costs. When companies meet predetermined sustainability objectives, these loans typically offer reduced interest rates, directly incentivizing firms to adopt sustainable practices (Jin et al., \u003cspan citationid=\"CR48\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Chai et al. (\u003cspan citationid=\"CR23\" class=\"CitationRef\"\u003e2022\u003c/span\u003e) found that companies utilizing sustainability-linked loans tend to have lower borrowing expenses, as lenders may perceive these firms as less risky due to their commitment to social and environmental goals, resulting in reduced interest payments.\u003c/p\u003e\u003cp\u003eSustainability-linked loans impact the WACC by decreasing borrowing costs through favorable loan terms and by enhancing investor confidence, which reduces the cost of equity (Yemelyanov et al., \u003cspan citationid=\"CR116\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). Chava and Roberts (2021) found that firms using sustainability-linked loans often experience a decline in their WACC due to the combined effect of reduced debt expenses and improved equity conditions resulting from enhanced sustainability credentials. Based on this discussion, the following hypothesis is proposed:\u003c/p\u003e\u003cp\u003eH3: Sustainability-linked loans have a negative and significant impact on the cost of capital.\u003c/p\u003e\u003cdiv id=\"Sec8\" class=\"Section2\"\u003e\u003ch2\u003eThe Influence of investment in renewable energy on the cost of capital\u003c/h2\u003e\u003cp\u003eInvesting in renewable energy can lower the cost of equity by enhancing a company\u0026rsquo;s sustainability reputation and attracting investors who ESG factors. Equity investors often perceive companies committed to renewable energy as forward-thinking and dedicated to long-term sustainability, which reduces perceived risk (Grishunin et al., \u003cspan citationid=\"CR38\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Zhang et al. (\u003cspan citationid=\"CR119\" class=\"CitationRef\"\u003e2021\u003c/span\u003e) found that companies that invest in renewable energy projects tend to experience a decrease in their cost of equity due to increased investor confidence and demand for environmentally sustainable practices. Their study concluded that such investments signal a company\u0026rsquo;s commitment to managing risks and pursuing future growth, thereby reducing the required return on equity.\u003c/p\u003e\u003cp\u003eInvesting in renewable energy can also enhance creditworthiness and reduce borrowing costs by improving a company\u0026rsquo;s environmental reputation. Lenders may view firms that allocate funds toward renewable energy investments more favorably (Wang \u0026amp; Zhao, \u003cspan citationid=\"CR110\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Qadir et al. (\u003cspan citationid=\"CR83\" class=\"CitationRef\"\u003e2021\u003c/span\u003e) found that companies engaged in renewable energy projects often secure bank funding at lower interest rates. They noted that lenders are more likely to offer better terms to firms with strong renewable energy portfolios because these companies have fewer environmental liabilities and align with global sustainability trends.\u003c/p\u003e\u003cp\u003eRenewable energy investments impact the WACC by influencing both debt and equity costs. The combined effect of reducing expenses in these areas can lower a company\u0026rsquo;s overall WACC. Polzin et al. (\u003cspan citationid=\"CR82\" class=\"CitationRef\"\u003e2021\u003c/span\u003e) found that firms that allocate resources to renewable energy typically experience a reduction in their WACC. The study attributed this decrease to reduced equity costs due to improved investor perceptions and lower borrowing costs resulting from favorable lending terms tied to sustainability. In the light of this discussion, the following hypothesis is proposed:\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eH4\u003c/strong\u003e\u003cp\u003eInvestment in renewable energy has a positive and significant impact on the cost of capital.\u003c/p\u003e\u003c/p\u003e\u003cp\u003e\u003cb\u003eThe moderating role of firm age in the relationship between green bond issue and cost of capital\u003c/b\u003e\u003c/p\u003e\u003cp\u003eFirm age can affect investor views of risk and credibility, reducing the relationship between the cost of capital and the issuing of green bonds. Established firms typically possess a strong reputation, financial stability, and a track record of debt repayment\u0026mdash;attributes that enhance investor confidence in their green bonds (Flammer, \u003cspan citationid=\"CR35\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). The lower risk premiums resulting from this improved credibility may contribute to a reduction in overall capital costs. Moreover, established firms may have stronger affiliations with rating agencies and investors, facilitating more favorable terms for green bond issuance than newer enterprises, which face heightened scrutiny and perceived risk (Langohr \u0026amp; Langohr, \u003cspan citationid=\"CR61\" class=\"CitationRef\"\u003e2010\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eConversely, despite their significant potential for innovation and sustainability, new companies may lack the financial foundation and market confidence necessary to secure advantageous capital costs when issuing green bonds (Shishlov et al., \u003cspan citationid=\"CR93\" class=\"CitationRef\"\u003e2016\u003c/span\u003e). The restricted operational history and questionable long-term sustainability may make investors perceive them more hazardous. As a result, the capital costs for startups issuing green bonds may not decrease as significantly as those for more established enterprises. Companies can benefit from issuing green bonds by positioning themselves in the market and attracting impact-oriented investors, provided they can persuasively demonstrate their commitment to environmental, social, and governance (ESG) principles with strong financial performance (Arnell, \u003cspan citationid=\"CR13\" class=\"CitationRef\"\u003e2022\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eH4: Firm age positively and significantly moderate the relationship between green bond issue and cost of capital.\u003c/p\u003e\u003cp\u003e\u003cb\u003eThe moderating role of firm size in the relationship between green bond issue and cost of capital\u003c/b\u003e\u003c/p\u003e\u003cp\u003eFirm size affects the extent of information asymmetry and market access, altering the relationship between green bond issuance and the cost of capital. Larger corporations typically possess well-established reputations, enhanced financial transparency, and greater visibility in financial markets, which reduce investor fear (Wright \u0026amp; Rwabizambuga, \u003cspan citationid=\"CR115\" class=\"CitationRef\"\u003e2006\u003c/span\u003e). This transparency fosters investor confidence in the company's ability to meet its green bond commitments, reducing risk premiums and lowering capital costs. Moreover, large corporations can establish stronger relationships with institutional investors, enabling them to secure green financing at more favorable rates than smaller enterprises (Taghizadeh-Hesary \u0026amp; Yoshino, N2020).\u003c/p\u003e\u003cp\u003eConversely, smaller enterprises may encounter greater information asymmetry and investor skepticism over their financial health and commitment to ecologically sustainable initiatives (Siddique \u0026amp; Sciulli, \u003cspan citationid=\"CR94\" class=\"CitationRef\"\u003e2018\u003c/span\u003e). Their inadequate track record may hinder their capacity to convince investors of the legitimacy of their sustainability initiatives, hence necessitating higher returns and diminishing the cost-reducing benefits associated with green bond issuance. Smaller companies can attract impact-driven investors, albeit at a higher cost than larger firms, if they effectively demonstrate strong environmental, social, and governance (ESG) performance and align their green bond frameworks with recognized standards.\u003c/p\u003e\u003c/div\u003e"},{"header":"Methodology","content":"\u003cdiv id=\"Sec10\" class=\"Section2\"\u003e\u003ch2\u003eData and sample\u003c/h2\u003e\u003cp\u003eThe study was conducted in the United Kingdom due to its strong regulatory framework and well-developed sustainable finance market (Robins et al., \u003cspan citationid=\"CR84\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). The UK provides an ideal environment for research on sustainable finance owing to its robust financial system, frequent issuance of green bonds, and innovative financial instruments related to sustainability (Steffen, \u003cspan citationid=\"CR98\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). The study focused on the UK because of the nation’s strong commitment to integrating sustainability into financial practices.\u003c/p\u003e\u003cp\u003eThe research targeted non-financial companies publicly listed on the London Stock Exchange (LSE), a leading global financial center. The LSE's active role in promoting sustainable finance standards (Robins et al., \u003cspan citationid=\"CR84\" class=\"CitationRef\"\u003e2020\u003c/span\u003e) was a key reason for this choice. Non-financial firms listed on the LSE share similar approaches to sustainable finance investments, enabling a comprehensive analysis of how such strategies influence the cost of capital. The findings encourage these companies to integrate sustainability more systematically into their financial decision-making processes, aligning with broader corporate sustainability goals and contributing to a more sustainable business landscape.\u003c/p\u003e\u003cp\u003eData for the study was obtained from Thomson Reuters Eikon DataStream, a reputable data repository known for its high-quality financial information. Companies were selected based on specific inclusion criteria to ensure a rigorous selection process. The first criterion required that companies be listed on the LSE between 2006 and 2023, the period under study. The second criterion was that firms must have complete data for the designated years in Eikon without any missing entries. Lastly, the selected companies must not be classified as financial institutions and must belong to particular industries in the UK, such as consumer goods, oil and gas, industrial products, construction, and automobiles.\u003c/p\u003e\u003cp\u003eA purposive sampling technique was used to select 18 years of data for 227 companies between 2006 and 2023, resulting in 4,086 firm-year observations. Meeting these criteria also produced balanced panel data, which is essential for maintaining analytical integrity and eliminating biases associated with unbalanced data.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\"Sec11\" class=\"Section2\"\u003e\u003ch2\u003eDependent, independent and moderating variables\u003c/h2\u003e\u003cp\u003eThe study's dependent variable was the cost of capital, which includes the WACC, the cost of debt, and the cost of equity. Each variable was selected for its relevance to the study and its crucial role in understanding the cost of capital.\u003c/p\u003e\u003cp\u003eThe cost of equity represents the rate of return that shareholders expect from their investment in a company (Vernimmen et al., \u003cspan citationid=\"CR108\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Evaluating the financial effects of sustainable financing is essential, as the cost of equity reflects the level of risk perceived by equity investors. This study employs the cost of equity to gain insights into how sustainable investments influence investor expectations and the required returns on equity. Implementing strong sustainable practices typically leads to a lower cost of equity, as investors view these companies as less risky, which results in more favorable financing terms (Yu et al., 2022).\u003c/p\u003e\u003cp\u003eThe cost of debt refers to the actual interest rate that a corporation incurs when borrowing money (Schroeder et al., \u003cspan citationid=\"CR90\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). This cost is influenced by prevailing interest rates and the company's creditworthiness. The significance of sustainable financing in this study lies in its potential to enhance a company's credit profile and reduce borrowing costs. Companies with strong sustainability credentials can often secure loans at lower interest rates, which helps decrease their overall borrowing expenses (Kimmel et al., \u003cspan citationid=\"CR55\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). Analyzing the cost of debt facilitates understanding how sustainable finance impacts loan terms and financial stability.\u003c/p\u003e\u003cp\u003eWACC represents the average rate of return a firm must pay its shareholders and creditors, calculated based on the proportion of each component in the company’s capital structure (Warren et al., \u003cspan citationid=\"CR113\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). This metric is essential for assessing a company's overall cost of capital and evaluating investment opportunities by determining the total cost of financing.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\"Sec12\" class=\"Section2\"\u003e\u003ch2\u003eIndependent variables\u003c/h2\u003e\u003cp\u003eThe study employed green bonds issued, CSR expenditures, sustainability-linked loans, and investments in renewable energy as independent variables to represent the various investments companies make in sustainable finance. Green bonds are specifically issued to finance activities with positive environmental impacts (Bhutta et al., \u003cspan citationid=\"CR16\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). These bonds are designed to generate funds for environmentally conscious initiatives, such as installing renewable energy sources or enhancing energy efficiency. Green bonds serve as a relevant independent variable due to their direct connection to sustainable finance and their impact on capital costs. Companies that issue green bonds often benefit from reduced borrowing costs, as investors are enthusiastic about financing environmentally beneficial projects, leading to lower overall financing expenses for these companies (Lin \u0026amp; Su, \u003cspan citationid=\"CR65\" class=\"CitationRef\"\u003e2022\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eCSR expenditures refer to the financial resources that a corporation allocates to social and environmental initiatives in alignment with its corporate social responsibility (Islam et al., \u003cspan citationid=\"CR46\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). The significance of these expenditures in the study lies in their ability to demonstrate a business's commitment to sustainability and their potential impact on investor perceptions. Increasing investments in CSR can signal to investors that a company is actively taking steps to mitigate its social and environmental effects, which may lead to a reduced perception of risk and, consequently, a lower cost of equity. Evidence shows that higher CSR expenditures enhance a company's brand and foster investor trust, resulting in improved financing conditions and reduced capital expenses (Ibrahim et al., \u003cspan citationid=\"CR44\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eSustainability-linked loans are loans with interest rates determined by the borrower's performance in achieving specified sustainability objectives (Pohl et al., \u003cspan citationid=\"CR81\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). These loans provide financial incentives for corporations to meet specific social or environmental goals, establishing a direct correlation between financially beneficial activities and sustainable behaviors. This makes them an appropriate independent variable. Organizations with sustainability-linked loans often qualify for reduced interest rates if they successfully achieve their sustainability targets (Lagoarde-Segot, \u003cspan citationid=\"CR59\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). This relationship can lead to decreased borrowing costs and a lower cost of capital, illustrating the impact of sustainable financial solutions on financing expenses.\u003c/p\u003e\u003cp\u003eInvestments in renewable energy refer to funding directed toward initiatives and innovations that generate energy from renewable sources such as biomass, solar, and wind (Sun, \u003cspan citationid=\"CR100\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). The significance of this variable lies in its indication of a firm's commitment to sustainable energy solutions, which can influence the perceptions of lenders and investors. This variable is relevant due to the favorable ecological effects and reduced risks associated with renewable energy initiatives. By enhancing the company’s long-term growth opportunities and aligning with global sustainability trends, investments in renewable energy can contribute to a lower WACC.\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\"Sec13\" class=\"Section2\"\u003e\u003ch2\u003eControl variables\u003c/h2\u003e\u003cp\u003eThe study focused on three crucial control variables (age of the firm, the size of the firm, and leverage) to delve into their profound impact on the cost of capital. Firm age, a key indicator of a company's stability, experience, and market reputation, is pivotal in shaping its creditworthiness and borrowing expenses. Established enterprises can mitigate perceived investment risks with their cultivated relationships and financial expertise. By using firm age as a control variable, the study ensures that fundamental financial and operational factors, rather than firm maturity, drive the variations in the cost of capital.\u003c/p\u003e\u003cp\u003eThe size of a firm, particularly in the case of large corporations, significantly influences its financial stability and access to finance. These large entities, with their economies of scale, enhanced negotiation power with creditors, and increased access to diverse financing options, can reduce their capital costs. Their diminished default risk and heightened investor confidence further contribute to reduced interest rates and enhanced credit terms. By incorporating business size as a control variable, the study ensures that its impact does not distort the analyzed relationship, accounting for these financial advantages.\u003c/p\u003e\u003cp\u003eLeverage, quantified by the debt-to-equity ratio, is a control variable that indicates a company's reliance on borrowed capital for expansion and operational activities (Amin \u0026amp; Cek, \u003cspan citationid=\"CR6\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). Fixed interest obligations and higher leverage increase financial risk, typically leading to an increased cost of capital. Nevertheless, moderate leverage may signify proficient capital structure management and fiscal discipline. The study employs leverage as a control variable to ensure that other financial factors' influence on the cost of capital is isolated, hence avoiding misinterpretation of results from variations in a company's debt financing strategies (Mensah et al., \u003cspan citationid=\"CR74\" class=\"CitationRef\"\u003e2024\u003c/span\u003e).\u003c/p\u003e\u003cp\u003e\u003c/p\u003e\u003cdiv class=\"gridtable\"\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c1\" colnum=\"1\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c2\" colnum=\"2\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c3\" colnum=\"3\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c4\" colnum=\"4\"\u003e\u003c/div\u003e\u003ctable float=\"Yes\" id=\"Tab1\" border=\"1\"\u003e\u003ccaption language=\"En\"\u003e\u003cdiv class=\"CaptionNumber\"\u003eTable 1\u003c/div\u003e\u003cdiv class=\"CaptionContent\"\u003e\u003cp\u003eSummary of variables\u003c/p\u003e\u003c/div\u003e\u003c/caption\u003e\u003ccolgroup cols=\"4\"\u003e\u003c/colgroup\u003e\u003cthead\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c1\"\u003e\u003cp\u003eIndex\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c2\"\u003e\u003cp\u003eVariable\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c3\"\u003e\u003cp\u003eSymbol\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c4\"\u003e\u003cp\u003eFormulae\u003c/p\u003e\u003c/th\u003e\u003c/tr\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c1\"\u003e\u0026nbsp;\u003c/th\u003e\u003cth align=\"left\" colname=\"c2\"\u003e\u003cp\u003eDependent variable:\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c3\"\u003e\u0026nbsp;\u003c/th\u003e\u003cth align=\"left\" colname=\"c4\"\u003e\u0026nbsp;\u003c/th\u003e\u003c/tr\u003e\u003c/thead\u003e\u003ctbody\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e1\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eCost of debt\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eCODET\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:\\frac{Annual\\:Interest\\:Expense\\:}{Total\\:Debt}\\:*\\:(1-\\:tax\\:rate)\\)\u003c/span\u003e\u003c/span\u003e\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e2\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eCost of equity\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eCOEQT\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:\\frac{Dividend\\:per\\:share}{stock\\:price\\:}\\:+\\:Growth\\:Rate\\:of\\:Dividends\\)\u003c/span\u003e\u003c/span\u003e\u003c/p\u003e\u003cp\u003eNB: Growth Rate of Dividends is differential growth (current different – previous dividend) / previous dividend * 100\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e3\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eWACC\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eWACC\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:(\\frac{E}{V}\\times\\:Cost\\:of\\:Equity)+(\\frac{D}{V}\\:\\:\\times\\:Cost\\:of\\:Debt\\times\\:(-Tax\\:Rate\\left)\\right)\\)\u003c/span\u003e\u003c/span\u003e\u003c/p\u003e\u003cp\u003e“E” represents the market value of the company's equity.\u003c/p\u003e\u003cp\u003e“D” represents the market value of the company's debt.\u003c/p\u003e\u003cp\u003e“V” represents the total market value of the company (sum of equity and debt).\u003c/p\u003e\u003cp\u003eCost of Equity is the required rate of return on equity.\u003c/p\u003e\u003cp\u003eCost of Debt is the interest rate on debt.\u003c/p\u003e\u003cp\u003eTax Rate is the corporate tax rate.\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e\u003cb\u003eIndependent variables\u003c/b\u003e:\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e1\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eGreen bond issued\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eGREB\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003eLog (Green bond issued)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e2\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eCSR expenditures\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eCSEX\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003eLog (CSR expenditures)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e3\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eSustainable linked loan\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eSULN\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003eLog (Sustainability linked loans)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e4\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eInvestment in renewable energy\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eINRE\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003eLog (Investment in renewable energy)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e\u003cb\u003eControl variables\u003c/b\u003e:\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e1\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eFirm’s age\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eFAGE\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003eFrom the year that the companies were incorporated on the stock market to the year in which the data was obtained.\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e2\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eFirm’s size\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eFSIZ\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003eLog (total assets)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003e3\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003eLeverage\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003eLEGE\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003eTotal debt/ total equity\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003c/tbody\u003e\u003c/table\u003e\u003c/div\u003e\u003cp\u003e\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\"Sec14\" class=\"Section2\"\u003e\u003ch2\u003eThe choice of regression estimation methods\u003c/h2\u003e\u003cp\u003eSelecting appropriate estimation methods is essential for ensuring precise data analysis results. The most suitable models were chosen through a three-step process. First, the presence of any associations among the units in the panel data was assessed using cross-sectional dependence tests. It is crucial to acknowledge cross-sectional dependence, as failing to do so may compromise the validity of the results (Ulucak et al., 2021). To determine cross-sectional dependence or independence, the Pesaran, Friedman, and Frees statistical tests were employed. The alternative hypothesis asserts the presence of cross-sectional dependence, while the null hypothesis asserts cross-sectional independence. The results in Table\u0026nbsp;\u003cspan refid=\"Tab2\" class=\"InternalRef\"\u003e2\u003c/span\u003e support the alternative hypothesis, confirming the existence of cross-sectional dependence in the dataset.\u003c/p\u003e\u003cp\u003eThe second step involved the use of Pesaran-Yamagata tests to determine the heterogeneity or homogeneity of the panel datasets. This test aims to ascertain whether there are statistically significant differences in the relationships between variables across different units. While the null hypothesis supports homogeneity, the alternative hypothesis suggests heterogeneity. The findings presented in Table\u0026nbsp;\u003cspan refid=\"Tab2\" class=\"InternalRef\"\u003e2\u003c/span\u003e indicate that the datasets are heterogeneous.\u003c/p\u003e\u003cp\u003eBased on the results of the heterogeneity and cross-sectional dependence tests, the Common Correlated Effects Mean Group (CCEMG) method was selected as a reliable estimation approach for this study. The CCEMG method is particularly effective for modeling panel data with cross-sectional dependence and variable relationships between entities (Musah et al., \u003cspan citationid=\"CR76\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). It operates by calculating the average set of coefficients while considering shared attributes that affect all cross-sectional units. The CCEMG estimator provides a robust solution to cross-sectional dependence. Conventional estimation methods that assume independence among entities may yield biased results when faced with common disruptions or patterns. By statistically modeling the correlations between units, CCEMG addresses this issue, resulting in accurate estimates that reflect the true relationships within the dataset (Jijian et al., \u003cspan citationid=\"CR47\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe ability of CCEMG to estimate effects specific to individual units underpins its effectiveness in managing heterogeneity (Boukhelkhal, \u003cspan citationid=\"CR19\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). This feature enhances data comprehension by allowing the model to incorporate variations in the relationships of variables across multiple units. CCEMG is a superior choice for research involving complex interactions and diverse effects across different groups, as it enhances the validity of findings by accounting for both individual and common factors.\u003c/p\u003e\u003cp\u003eCCEMG was selected after evaluating various estimation methods, including random effects (RE), fixed effects (FE), and pooled ordinary least squares (POLS). Other estimation methods were deemed less appropriate for yielding unbiased results in the presence of cross-sectional dependence. While the FE model incorporates unobserved time-invariant characteristics, it does not account for cross-sectional dependence, potentially resulting in biased estimates (Arhinful et al., \u003cspan citationid=\"CR9\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). The RE model’s assumption of homogeneous variances across units is invalidated by the presence of heterogeneity, leading to inefficiencies. Additionally, the reliance of POLS on the assumption of independent errors across units limits its suitability for this investigation due to the presence of cross-sectional dependence and heterogeneity. The CCEMG estimator model is presented:\u003c/p\u003e\u003cdiv id=\"Equa\" class=\"Equation\"\u003e\u003cdiv format=\"TEX\" class=\"mathdisplay\" id=\"FileID_Equa\" name=\"EquationSource\"\u003e\n$$\\:{y}_{it}=\\:{\\alpha\\:}_{it}+{\\beta\\:}_{i{X}_{it}}+\\:{\\lambda\\:}_{i}^{ᵎ}{f}_{t}+{u}_{it}$$\u003c/div\u003e\u003c/div\u003e\u003cp\u003e\u003c/p\u003e\u003cp\u003eWhere “\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:{y}_{it}\"\\)\u003c/span\u003e\u003c/span\u003e is the dependent variable for unit i at time t.\u003c/p\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:{X}_{it}\\)\u003c/span\u003e\u003c/span\u003e is the independent variable(s) for unit I and at time t.\u003c/p\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:{\\alpha\\:}_{it}\\)\u003c/span\u003e\u003c/span\u003e is the individual- specific factors\u003c/p\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:{\\beta\\:}_{i}\\)\u003c/span\u003e\u003c/span\u003e is the coefficient for the independent variable(s) for unit i.\u003c/p\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:{f}_{t}\\)\u003c/span\u003e\u003c/span\u003e is represents the unobserved common factors that affect all units in the panel.\u003c/p\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:{\\lambda\\:}_{i}^{ᵎ}\\)\u003c/span\u003e\u003c/span\u003e is the factor loading for unit 𝑖\u003c/p\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:{u}_{it}\\)\u003c/span\u003e\u003c/span\u003e is the error term\u003c/p\u003e\u003cp\u003eThe third step involved testing for endogeneity to determine whether the independent variables were endogenous or exogenous. The Wu-Hausman and Durbin-Wu-Hausman (DWH) tests were employed to assess the endogeneity of the independent variables. The results presented in Table\u0026nbsp;\u003cspan refid=\"Tab2\" class=\"InternalRef\"\u003e2\u003c/span\u003e support the alternative hypothesis, indicating the presence of endogeneity among the independent variables. Consequently, the generalized method of moments (GMM) was chosen to address this endogeneity issue.\u003c/p\u003e\u003cp\u003eGMM's effectiveness in tackling endogeneity arises from its ability to provide consistent estimates, even when the independent variables and error terms are correlated (Arhinful \u0026amp; Radmehr, \u003cspan citationid=\"CR7\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). This estimation method is particularly suited for dynamic panel data analysis due to its capacity to leverage the complexity of the data across various entities and time periods. By implementing data-driven moment conditions, GMM enhances the robustness of the analysis, leading to more accurate estimations (Mensah et al., \u003cspan citationid=\"CR74\" class=\"CitationRef\"\u003e2024\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eCompared to two-stage least squares (2SLS), GMM offers distinct advantages. While the 2SLS method utilizes instrumental variables to mitigate endogeneity, its reliance on robust instruments may lead to bias if these instruments are of inferior quality (Keane et al., 2021). GMM addresses this issue by incorporating a broader range of moment conditions, thereby improving the precision of the findings. Furthermore, GMM is the most appropriate method for addressing endogeneity in this study, as it can effectively resolve various econometric challenges, including heteroscedasticity and autocorrelation (Arhinful et al., \u003cspan citationid=\"CR9\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). The GMM model is presented as follows:\u003c/p\u003e\u003cdiv id=\"Equb\" class=\"Equation\"\u003e\u003cdiv format=\"TEX\" class=\"mathdisplay\" id=\"FileID_Equb\" name=\"EquationSource\"\u003e\n$$\\:{\\theta\\:}^{GMM}=argmin\\theta\\:\\left\\{\\left(\\frac{1}{N}\\:{\\sum\\:}_{i-1}^{N}\\text{g}(\\text{y}\\text{i}\\text{},\\text{x}\\text{i}\\text{},\\text{Z}\\text{i}\\text{})\\right)\\:W\\left(\\frac{1}{N}\\:{\\sum\\:}_{i-1}^{N}\\text{g}(\\text{y}\\text{i}\\text{},\\text{x}\\text{i}\\text{},\\text{Z}\\text{i}\\text{})\\right)\\right\\}$$\u003c/div\u003e\u003c/div\u003e\u003cp\u003e\u003c/p\u003e\u003cp\u003eWhere:\u003c/p\u003e\u003cdiv class=\"BlockQuote\"\u003e\u003cp\u003e\u003cspan class=\"InlineEquation\"\u003e\u003cspan class=\"mathinline\"\u003e\\(\\:\\widehat{\\theta\\:}\\)\u003c/span\u003e\u003c/span\u003e GMM​ is the Two-Step GMM estimator of the parameter vector θ.\u003c/p\u003e\u003cp\u003eW is a weighting matrix that optimizes the efficiency of the estimator\u003c/p\u003e\u003c/div\u003e\u003cp\u003e\u003c/p\u003e\u003cp\u003e\u003c/p\u003e\u003cdiv class=\"gridtable\"\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c1\" colnum=\"1\"\u003e\u003c/div\u003e\u003cdiv align=\"char\" char=\".\" class=\"colspec\" colname=\"c2\" colnum=\"2\"\u003e\u003c/div\u003e\u003cdiv align=\"char\" char=\".\" class=\"colspec\" colname=\"c3\" colnum=\"3\"\u003e\u003c/div\u003e\u003cdiv align=\"char\" char=\".\" class=\"colspec\" colname=\"c4\" colnum=\"4\"\u003e\u003c/div\u003e\u003ctable float=\"Yes\" id=\"Tab2\" border=\"1\"\u003e\u003ccaption language=\"En\"\u003e\u003cdiv class=\"CaptionNumber\"\u003eTable 2\u003c/div\u003e\u003cdiv class=\"CaptionContent\"\u003e\u003cp\u003eCross sectional dependence, heterogeneity and endogeneity test\u003c/p\u003e\u003c/div\u003e\u003c/caption\u003e\u003ccolgroup cols=\"4\"\u003e\u003c/colgroup\u003e\u003cthead\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c1\"\u003e\u003cp\u003eTypes of CD tests\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c2\"\u003e\u003cp\u003eCost of debt\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c3\"\u003e\u003cp\u003eCost of equity\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c4\"\u003e\u003cp\u003eWACC\u003c/p\u003e\u003c/th\u003e\u003c/tr\u003e\u003c/thead\u003e\u003ctbody\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003ePesaran's test\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e77.262 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e3.167 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e66.731\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFriedman's test\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e1698.096 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e906.888 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e1436.692\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFrees' test\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e3.167 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e0.688 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e2.253 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003eHeterogeneity test (Peseran-Yamagata test)\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eΔ-tilde stat.\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e31.345 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e12.034 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e23.842 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eΔadj-tilde stat.\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e45.341 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e15.982 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e34.914 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003e\u003cb\u003eEndogeneity tests\u003c/b\u003e\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eDurbin-Wu-Hausman (DWH) Test\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e12.823 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e11.232 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e16.412 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eWu-Hausman test\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e9.903 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e18.320 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e10.311 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003c/tbody\u003e\u003c/table\u003e\u003c/div\u003e\u003cp\u003e\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\"Sec15\" class=\"Section2\"\u003e\u003cp\u003e*** p \u0026lt; .01, ** p \u0026lt; .05, * p \u0026lt; .1\u003c/p\u003e\u003cdiv id=\"Sec16\" class=\"Section3\"\u003e\u003ch2\u003eModel specification\u003c/h2\u003e\u003cp\u003eThis study employed three models to examine the relationship between investment in sustainable finance and the cost of capital. Model 1 presents the direct relationship between investment in sustainable finance and the cost of capital. Model 2 presents the moderating role of age, and model 3 presents the moderating role of a firm's size in this relationship.\u003c/p\u003e\u003c/div\u003e\u003c/div\u003e\u003cdiv id=\"Sec17\" class=\"Section2\"\u003e\u003ch2\u003eModel 1\u003c/h2\u003e\u003cp\u003e\u003c/p\u003e\u003cdiv id=\"Equc\" class=\"Equation\"\u003e\u003cdiv format=\"TEX\" class=\"mathdisplay\" id=\"FileID_Equc\" name=\"EquationSource\"\u003e\n$$\\:COC={\\beta\\:0}_{n,\\:c}+{\\beta\\:1GREB}_{n,\\:c}+\\:{Log\\beta\\:CSEX}_{n,\\:c}+\\:Log{\\beta\\:3SULN}_{n,\\:c}+\\:{\\beta\\:4INRE}_{n,\\:c}+\\:{\\beta\\:5FAGE}_{n,\\:c}+{\\beta\\:6FSIZ}_{n,\\:c}+{\\beta\\:7LEGE}_{n,\\:c}+\\:{u}_{n,\\:c}$$\u003c/div\u003e\u003c/div\u003e\u003cp\u003e\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\"Sec18\" class=\"Section2\"\u003e\u003ch2\u003eModel 2\u003c/h2\u003e\u003cp\u003e\u003c/p\u003e\u003cdiv id=\"Equd\" class=\"Equation\"\u003e\u003cdiv format=\"TEX\" class=\"mathdisplay\" id=\"FileID_Equd\" name=\"EquationSource\"\u003e\n$$\\:COC={\\beta\\:0}_{n,\\:c}+{\\beta\\:1GREB}_{n,\\:c}+\\:{Log\\beta\\:CSEX}_{n,\\:c}+\\:Log{\\beta\\:3SULN}_{n,\\:c}+\\:{\\beta\\:4INRE}_{n,\\:c}+\\:{\\beta\\:5FAGE}_{n,\\:c}+{\\beta\\:6FSIZ}_{n,\\:c}+{\\beta\\:7LEGE}_{n,\\:c}+{\\beta\\:8GREB*FAGE}_{n,\\:c}+\\:{u}_{n,\\:c}$$\u003c/div\u003e\u003c/div\u003e\u003cp\u003e\u003c/p\u003e\u003c/div\u003e\u003cdiv id=\"Sec19\" class=\"Section2\"\u003e\u003ch2\u003eModel 3\u003c/h2\u003e\u003cp\u003e\u003c/p\u003e\u003cdiv id=\"Eque\" class=\"Equation\"\u003e\u003cdiv format=\"TEX\" class=\"mathdisplay\" id=\"FileID_Eque\" name=\"EquationSource\"\u003e\n$$\\:COC={\\beta\\:0}_{n,\\:c}+{\\beta\\:1GREB}_{n,\\:c}+\\:{Log\\beta\\:CSEX}_{n,\\:c}+\\:Log{\\beta\\:3SULN}_{n,\\:c}+\\:{\\beta\\:4INRE}_{n,\\:c}+\\:{\\beta\\:5FAGE}_{n,\\:c}+{\\beta\\:6FSIZ}_{n,\\:c}+{\\beta\\:7LEGE}_{n,\\:c}+{\\beta\\:8GREB*FSIZ}_{n,\\:c}+\\:{u}_{n,\\:c}$$\u003c/div\u003e\u003c/div\u003e\u003cp\u003e\u003c/p\u003e\u003cp\u003e\u003cstrong\u003eNB\u003c/strong\u003e\u003c/p\u003e\u003cp\u003eThe meanings of the variable abbreviations can be found in Table\u0026nbsp;\u003cspan refid=\"Tab1\" class=\"InternalRef\"\u003e1\u003c/span\u003e. COC denotes the cost of capital (CODET, COEQT, WACC), “n” denotes time, “c” donates companies, and “u” denotes the error terms.\u003c/p\u003e"},{"header":"Results and discussions","content":"\u003cdiv class=\"gridtable\"\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c1\" colnum=\"1\"\u003e\u003c/div\u003e\u003cdiv align=\"char\" char=\".\" class=\"colspec\" colname=\"c2\" colnum=\"2\"\u003e\u003c/div\u003e\u003cdiv align=\"char\" char=\".\" class=\"colspec\" colname=\"c3\" colnum=\"3\"\u003e\u003c/div\u003e\u003cdiv align=\"char\" char=\".\" class=\"colspec\" colname=\"c4\" colnum=\"4\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c5\" colnum=\"5\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c6\" colnum=\"6\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c7\" colnum=\"7\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c8\" colnum=\"8\"\u003e\u003c/div\u003e\u003ctable float=\"Yes\" id=\"Tab3\" border=\"1\"\u003e\u003ccaption language=\"En\"\u003e\u003cdiv class=\"CaptionNumber\"\u003eTable 3\u003c/div\u003e\u003cdiv class=\"CaptionContent\"\u003e\u003cp\u003eDescriptive Statistics\u003c/p\u003e\u003c/div\u003e\u003c/caption\u003e\u003ccolgroup cols=\"8\"\u003e\u003c/colgroup\u003e\u003cthead\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c1\"\u003e\u003cp\u003eVariable\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c2\"\u003e\u003cp\u003eObs\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c3\"\u003e\u003cp\u003eMean\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c4\"\u003e\u003cp\u003eStd. Dev.\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c5\"\u003e\u003cp\u003eMin\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c6\"\u003e\u003cp\u003eMax\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c7\"\u003e\u003cp\u003eVIF\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c8\"\u003e\u003cp\u003e1/VIF\u003c/p\u003e\u003c/th\u003e\u003c/tr\u003e\u003c/thead\u003e\u003ctbody\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eCost of debt\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e4.427\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e3.248\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e1.216\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e10.031\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e-\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e-\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eCost of equity\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e3.503\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e3.164\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e1.22\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e88.613\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e-\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e-\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eWACC\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e4.096\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e3.090\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e.601\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e11.444\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e-\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e-\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eGreen bond issued\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e7.332\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e.756\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e5.300\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e10.078\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e2.378\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e.421\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eCSR expenditures\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e7.683\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e.694\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e6.164\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e10.339\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e2.863\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e.349\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eSustainability linked loans\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e7.279\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e.71\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e.058\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e9.958\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e1.923\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e.520\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eInvestment in renewable energy\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e7.258\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e.746\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e.022\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e9.907\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e2.279\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e.439\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFirm age\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e61.807\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c4\"\u003e\u003cp\u003e16.052\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e2\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e128\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e1.105\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e.905\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFirm size\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e1.497\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e.836\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.232\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e5.43\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e1.502\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e.666\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eLeverage\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"char\" char=\".\" colname=\"c3\"\u003e\u003cp\u003e1.345\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e.782\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.032\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e12.453\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e1.003\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.997\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003c/tbody\u003e\u003c/table\u003e\u003c/div\u003e\u003cp\u003eTable\u0026nbsp;\u003cspan refid=\"Tab3\" class=\"InternalRef\"\u003e3\u003c/span\u003e presents the descriptive statistics for the variables. The average cost of debt, which represents the interest rate borrowers pay on borrowed funds, directly impacts both the cost of financing and the company's profitability. Similarly, the average cost of equity, reflecting the rate of return that equity investors require, plays a crucial role in a company's valuation and influences its capital structure decisions. The average WACC aggregates equity and debt financing, serving as a key indicator of a company's financial health and sustainability performance.\u003c/p\u003e\u003cp\u003eThe average amount of green bonds issued by the company signifies a substantial financial commitment to environmentally beneficial projects that align with its sustainability goals. Likewise, the average CSR expenditures reflect the company's strong dedication to social responsibility, shaping its reputation and relationships with stakeholders. The mean for sustainability-linked loans indicates the company's strategic use of funding tied to sustainability performance, promoting long-term environmental and social objectives. The average investment in renewable energy demonstrates the company's commitment to sustainable energy sources, environmental innovation, and reducing carbon footprints. Additionally, the company's average age reflects its level of maturity, influencing its market expertise, stability, and strategic choices. The average size of the corporation indicates its operational scope and affects its financial robustness and market influence.\u003c/p\u003e\u003cp\u003eThe Variance Inflation Factor (VIF) was employed to assess the presence of multicollinearity among the specified variables. VIF values greater than 5 indicate the presence of multicollinearity (Arhinful et al., \u003cspan citationid=\"CR9\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). The VIF reported for all the independent variables is less than 5, suggesting the absence of significant multicollinearity among them.\u003c/p\u003e\u003cdiv class=\"gridtable\"\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c1\" colnum=\"1\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c2\" colnum=\"2\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c3\" colnum=\"3\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c4\" colnum=\"4\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c5\" colnum=\"5\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c6\" colnum=\"6\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c7\" colnum=\"7\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c8\" colnum=\"8\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c9\" colnum=\"9\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c10\" colnum=\"10\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c11\" colnum=\"11\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c12\" colnum=\"12\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c13\" colnum=\"13\"\u003e\u003c/div\u003e\u003ctable float=\"Yes\" id=\"Tab4\" border=\"1\"\u003e\u003ccaption language=\"En\"\u003e\u003cdiv class=\"CaptionNumber\"\u003eTable 4\u003c/div\u003e\u003cdiv class=\"CaptionContent\"\u003e\u003cp\u003eMatrix of correlations\u003c/p\u003e\u003c/div\u003e\u003c/caption\u003e\u003ccolgroup cols=\"13\"\u003e\u003c/colgroup\u003e\u003cthead\u003e\u003ctr\u003e\u003cth align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003eVariables\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c3\"\u003e\u003cp\u003e(1)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c4\"\u003e\u003cp\u003e(2)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c5\"\u003e\u003cp\u003e(3)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c6\"\u003e\u003cp\u003e(4)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c7\"\u003e\u003cp\u003e(5)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c8\"\u003e\u003cp\u003e(6)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c9\"\u003e\u003cp\u003e(7)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c10\"\u003e\u003cp\u003e(8)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c11\"\u003e\u003cp\u003e(9)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c12\"\u003e\u003cp\u003e(10)\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colspan=\"1\" nameend=\"c13\" namest=\"c13\"\u003e\u0026nbsp;\u003c/th\u003e\u003c/tr\u003e\u003c/thead\u003e\u003ctbody\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(1) Cost of debt\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"10\" nameend=\"c13\" namest=\"c4\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(2) Cost of equity\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.049\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"9\" nameend=\"c13\" namest=\"c5\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(3) WACC\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.506\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-0.049\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"8\" nameend=\"c13\" namest=\"c6\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(4) Green bond issued\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.051\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.021\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.037\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"7\" nameend=\"c13\" namest=\"c7\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(5) CSR expenditures\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.041\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.021\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.026\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.360\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"6\" nameend=\"c13\" namest=\"c8\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(6) Sustainability linked loans\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.021\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.018\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.009\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.416\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.424\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"5\" nameend=\"c13\" namest=\"c9\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(7) Investment in renewable energy\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.050\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.018\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.035\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.266\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.549\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.241\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"4\" nameend=\"c13\" namest=\"c10\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(8) Firm age\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.031\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.017\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.025\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.242\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.274\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.295\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.233\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"3\" nameend=\"c13\" namest=\"c11\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(9) Firm size\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-0.093\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-0.014\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-0.089\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e-0.104\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.044\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.236\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e-0.072\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.120\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c11\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c13\" namest=\"c12\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colspan=\"2\" nameend=\"c2\" namest=\"c1\"\u003e\u003cp\u003e(10) Leverage\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.031\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.102\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.008\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.512\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.007\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.382\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.003\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.052\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c11\"\u003e\u003cp\u003e0.081\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c12\"\u003e\u003cp\u003e1.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colspan=\"1\" nameend=\"c13\" namest=\"c13\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003c/tbody\u003e\u003c/table\u003e\u003c/div\u003e\u003cp\u003eTable\u0026nbsp;\u003cspan refid=\"Tab4\" class=\"InternalRef\"\u003e4\u003c/span\u003e presents the results of the correlation matrix analysis, which was conducted to assess multicollinearity among the independent variables. Multicollinearity is indicated when two independent variables have correlation coefficient values exceeding 0.70. The matrix results showed that the coefficients of the independent variables were below 0.70, suggesting a lack of multicollinearity. Additionally, the VIF analysis in Table\u0026nbsp;\u003cspan refid=\"Tab3\" class=\"InternalRef\"\u003e3\u003c/span\u003e further supports this finding, indicating that the dataset is free from multicollinearity.\u003c/p\u003e\u003cdiv class=\"gridtable\"\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c1\" colnum=\"1\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c2\" colnum=\"2\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c3\" colnum=\"3\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c4\" colnum=\"4\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c5\" colnum=\"5\"\u003e\u003c/div\u003e\u003ctable float=\"Yes\" id=\"Tab5\" border=\"1\"\u003e\u003ccaption language=\"En\"\u003e\u003cdiv class=\"CaptionNumber\"\u003eTable 5\u003c/div\u003e\u003cdiv class=\"CaptionContent\"\u003e\u003cp\u003eUnit root tests\u003c/p\u003e\u003c/div\u003e\u003c/caption\u003e\u003ccolgroup cols=\"5\"\u003e\u003c/colgroup\u003e\u003cthead\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c1\" morerows=\"1\" rowspan=\"2\"\u003e\u003cp\u003eVariable\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colspan=\"2\" nameend=\"c3\" namest=\"c2\"\u003e\u003cp\u003eCross-sectional Augmented Dickey-Fuller (CADF) test\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colspan=\"2\" nameend=\"c5\" namest=\"c4\"\u003e\u003cp\u003eCross-sectional Augmented IPS (CIPS)\u003c/p\u003e\u003c/th\u003e\u003c/tr\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c2\"\u003e\u003cp\u003eLevels\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c3\"\u003e\u003cp\u003e1st Difference\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c4\"\u003e\u003cp\u003eLevels\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c5\"\u003e\u003cp\u003e1st Difference\u003c/p\u003e\u003c/th\u003e\u003c/tr\u003e\u003c/thead\u003e\u003ctbody\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eCost of debt\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-41.946 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-78.229 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-36.219 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-74.790 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eCost of equity\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-48.940 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-82.787 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-44.633 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-81.500 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eWACC\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-42.579 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-78.406 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-36.909 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-75.348 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eGreen bond issued\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-43.334 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-73.835 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-38.052 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-71.219 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eCSR expenditures\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-43.068 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-75.002 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-37.393 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-73.056 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eSustainability linked loans\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-42.999 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-76.226 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-37.059 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-74.452 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eInvestment in renewable energy\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-43.215 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-74.351 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-37.794 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-71.856 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFirm age\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-50.539 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-85.403 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-47.793 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-88.433 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFirm size\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-46.393 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-81.726 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-42.644 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-81.107 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eLeverage\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-32.942 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-78.342 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-16.842 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e-78.932 (0.000) ***\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003c/tbody\u003e\u003c/table\u003e\u003c/div\u003e\u003ch2\u003e*** p \u0026lt; .01, ** p \u0026lt; .05, * p \u0026lt; .1\u003c/h2\u003e\u003cp\u003eTable\u0026nbsp;\u003cspan refid=\"Tab5\" class=\"InternalRef\"\u003e5\u003c/span\u003e presents the results of the panel unit root tests for the variables. This study employed the Cross-sectional Augmented Dickey-Fuller (CADF) and Cross-sectional Augmented IPS (CIPS) tests to determine whether the panel datasets are stationary or contain unit roots. These tests are specifically designed to account for the potential influence of cross-sectional dependence on unit root assessments. The CADF test, an extension of the traditional Augmented Dickey-Fuller (ADF) test, incorporates cross-sectional averages and is suitable for scenarios where variables from different units may influence one another. Additionally, the CIPS test enhances the IPS test by including cross-sectional dependence, resulting in a more reliable assessment of stationarity. The alternative hypothesis posits that individual variables exhibit stationarity, while the null hypothesis for both tests asserts that each variable possesses a unit root. The findings support the alternative hypothesis, confirming that the variables exhibit stationarity at both their levels and first differences. Including stationary variables is crucial to avoid misleading regression results and ensure that data interactions are precise and accurately represent underlying dynamics.\u003c/p\u003e\u003cdiv class=\"gridtable\"\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c1\" colnum=\"1\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c2\" colnum=\"2\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c3\" colnum=\"3\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c4\" colnum=\"4\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c5\" colnum=\"5\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c6\" colnum=\"6\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c7\" colnum=\"7\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c8\" colnum=\"8\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c9\" colnum=\"9\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c10\" colnum=\"10\"\u003e\u003c/div\u003e\u003ctable float=\"Yes\" id=\"Tab6\" border=\"1\"\u003e\u003ccaption language=\"En\"\u003e\u003cdiv class=\"CaptionNumber\"\u003eTable 6\u003c/div\u003e\u003cdiv class=\"CaptionContent\"\u003e\u003cp\u003e\u003cb\u003eCommon Correlated Effects Mean Group (CCEMG)results\u003c/b\u003e\u003c/p\u003e\u003c/div\u003e\u003c/caption\u003e\u003ccolgroup cols=\"10\"\u003e\u003c/colgroup\u003e\u003cthead\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c1\"\u003e\u0026nbsp;\u003c/th\u003e\u003cth align=\"left\" colspan=\"3\" nameend=\"c4\" namest=\"c2\"\u003e\u003cp\u003eCost of debt\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colspan=\"3\" nameend=\"c7\" namest=\"c5\"\u003e\u003cp\u003eCost of equity\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colspan=\"3\" nameend=\"c10\" namest=\"c8\"\u003e\u003cp\u003eWACC\u003c/p\u003e\u003c/th\u003e\u003c/tr\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c1\"\u003e\u003cp\u003eVariables\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c2\"\u003e\u003cp\u003eModel 1\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c3\"\u003e\u003cp\u003eModel 2\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c4\"\u003e\u003cp\u003eModel 3\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c5\"\u003e\u003cp\u003eModel 1\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c6\"\u003e\u003cp\u003eModel 2\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c7\"\u003e\u003cp\u003eModel 3\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c8\"\u003e\u003cp\u003eModel 1\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c9\"\u003e\u003cp\u003eModel 2\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c10\"\u003e\u003cp\u003eModel 3\u003c/p\u003e\u003c/th\u003e\u003c/tr\u003e\u003c/thead\u003e\u003ctbody\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eGreen bond issued\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.669 *\u003c/p\u003e\u003cp\u003e(0.384)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.102 ***\u003c/p\u003e\u003cp\u003e(0.043)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.473 ***\u003c/p\u003e\u003cp\u003e(0.103)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.444 **\u003c/p\u003e\u003cp\u003e(0.203)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.255 ***\u003c/p\u003e\u003cp\u003e(0.054)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.771 ***\u003c/p\u003e\u003cp\u003e(0.301)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.694 ***\u003c/p\u003e\u003cp\u003e(0.204)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.127 **\u003c/p\u003e\u003cp\u003e(0.060)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.137 ***\u003c/p\u003e\u003cp\u003e(0.056)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eCSR expenditures\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.730 *\u003c/p\u003e\u003cp\u003e(0.430)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.904 *\u003c/p\u003e\u003cp\u003e(0.467)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.627 ***\u003c/p\u003e\u003cp\u003e(0.213)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.244 ***\u003c/p\u003e\u003cp\u003e(0.105)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.396 ***\u003c/p\u003e\u003cp\u003e(0.123)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.698 ***\u003c/p\u003e\u003cp\u003e(0.303)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.960 ***\u003c/p\u003e\u003cp\u003e(0.391)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.123 *\u003c/p\u003e\u003cp\u003e(0.066)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.239 ***\u003c/p\u003e\u003cp\u003e(0.027)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eSustainability linked loans\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-0.268 ***\u003c/p\u003e\u003cp\u003e(0.046)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-0.310 ***\u003c/p\u003e\u003cp\u003e(0.118)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-0.197 ***\u003c/p\u003e\u003cp\u003e(0.023)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.210 ***\u003c/p\u003e\u003cp\u003e(0.025)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.583 ***\u003c/p\u003e\u003cp\u003e(0.221)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.275 ***\u003c/p\u003e\u003cp\u003e(0.102)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.460 *\u003c/p\u003e\u003cp\u003e(0.261)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.538 **\u003c/p\u003e\u003cp\u003e(0.262)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.598 ***\u003c/p\u003e\u003cp\u003e(0.204)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eInvestment in renewable energy\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.014 ***\u003c/p\u003e\u003cp\u003e(0.003)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.133 ***\u003c/p\u003e\u003cp\u003e(0.042)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.026 ***\u003c/p\u003e\u003cp\u003e(0.002)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.919 **\u003c/p\u003e\u003cp\u003e(0.438)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.862 ***\u003c/p\u003e\u003cp\u003e(0.462)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.945 ***\u003c/p\u003e\u003cp\u003e(0.426)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.305 ***\u003c/p\u003e\u003cp\u003e(0.096)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.247 ***\u003c/p\u003e\u003cp\u003e(0.075)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.289 ***\u003c/p\u003e\u003cp\u003e(0.084)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFirm age\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.005 ***\u003c/p\u003e\u003cp\u003e(0.001)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.013 ***\u003c/p\u003e\u003cp\u003e(0.002)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.004 **\u003c/p\u003e\u003cp\u003e(0.002)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.030 ***\u003c/p\u003e\u003cp\u003e(0.012)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.061 ***\u003c/p\u003e\u003cp\u003e(0.022)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.038 ***\u003c/p\u003e\u003cp\u003e(0.003)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.004 ***\u003c/p\u003e\u003cp\u003e(0.001)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.018 *\u003c/p\u003e\u003cp\u003e(0.010)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.017 *\u003c/p\u003e\u003cp\u003e(0.009)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFirm size\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-0.103 *\u003c/p\u003e\u003cp\u003e(0.059)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-0.126 **\u003c/p\u003e\u003cp\u003e(0.058)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-0.386 ***\u003c/p\u003e\u003cp\u003e(0.143)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.200 ***\u003c/p\u003e\u003cp\u003e(0.023)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.322 ***\u003c/p\u003e\u003cp\u003e(0.067)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.168 ***\u003c/p\u003e\u003cp\u003e(0.058)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.092 ***\u003c/p\u003e\u003cp\u003e(0.021)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.115 ***\u003c/p\u003e\u003cp\u003e(0.021)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.136 ***\u003c/p\u003e\u003cp\u003e(0.052)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eLeverage\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.873 ***\u003c/p\u003e\u003cp\u003e(0.102)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.802 ***\u003c/p\u003e\u003cp\u003e(0.112)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.871 ***\u003c/p\u003e\u003cp\u003e(0.103)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.573 ***\u003c/p\u003e\u003cp\u003e(0.121)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.582 ***\u003c/p\u003e\u003cp\u003e(0.121)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.588 ***\u003c/p\u003e\u003cp\u003e(0.118)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.209 ***\u003c/p\u003e\u003cp\u003e(0.032)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.218 ***\u003c/p\u003e\u003cp\u003e(0.030)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.229 ***\u003c/p\u003e\u003cp\u003e(0.032)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eGreen bond * Age\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e2.139 **\u003c/p\u003e\u003cp\u003e(0.994)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.477 ***\u003c/p\u003e\u003cp\u003e(0.173)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.279 *\u003c/p\u003e\u003cp\u003e(0.102)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eGreen bond * Size\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-0.069 ***\u003c/p\u003e\u003cp\u003e(0.021)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.235 ***\u003c/p\u003e\u003cp\u003e(0.081)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.391 ***\u003c/p\u003e\u003cp\u003e(.108)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eConstant\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.063 ***\u003c/p\u003e\u003cp\u003e(0.021)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e1.479 ***\u003c/p\u003e\u003cp\u003e(0.436)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.297 ***\u003c/p\u003e\u003cp\u003e(0.041)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.072 ***\u003c/p\u003e\u003cp\u003e(0.013)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e4.544 ***\u003c/p\u003e\u003cp\u003e(1.451)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e4.235 ***\u003c/p\u003e\u003cp\u003e(1.034)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.088 ***\u003c/p\u003e\u003cp\u003e(0.036)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e2.002 ***\u003c/p\u003e\u003cp\u003e(0.045)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.087 ***\u003c/p\u003e\u003cp\u003e(0.031)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eNumber of observations\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e4086\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eWald tests\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e33.24 (0.000)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e34.63 (0.000)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e35.59 (0.000)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e32.04\u003c/p\u003e\u003cp\u003e(0.000)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e44.29\u003c/p\u003e\u003cp\u003e(0.000)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e65.43 (0.000)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e28.08 (0.000)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e29.81 (0.000)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e29.99\u003c/p\u003e\u003cp\u003e(0.000)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eRMSE\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e2.0167\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e2.0078\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e2.0088\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e21.9430\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e21.8839\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e21.7926\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e2.1930\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e2.1841\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e2.1923\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003c/tbody\u003e\u003c/table\u003e\u003c/div\u003e\u003ch2\u003e*** p \u0026lt; .01, ** p \u0026lt; .05, * p \u0026lt; .1\u003c/h2\u003e\u003cp\u003eTable\u0026nbsp;\u003cspan refid=\"Tab6\" class=\"InternalRef\"\u003e6\u003c/span\u003e presents the results of the CCEMG estimator, showing the effect of investment in sustainable finance on the cost of capital.\u003c/p\u003e\u003ch2\u003eThe effect of investment in sustainable finance on the cost of debt\u003c/h2\u003e\u003cp\u003eThe study found that the issuance of green bonds has a positive and significant relationship with the cost of debt, aligning with the study's hypothesis. These findings support the RBV theory, which posits that green bonds can enhance a company's credibility and reputation, thereby reducing financing costs, as they are considered valuable and unique assets (Rouhelo \u0026amp; Kepsu, \u003cspan citationid=\"CR87\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). This indicates that green bonds, as distinctive assets, provide a competitive advantage in the market by offering more favorable financial conditions.\u003c/p\u003e\u003cp\u003eThe positive relationship can be attributed to the inherent appeal of green bonds to a broader range of socially conscious investors, which boosts demand and lowers borrowing costs (Kumar, \u003cspan citationid=\"CR58\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). By signaling a company's commitment to sustainability, green bonds mitigate perceived risks and decrease the cost of debt.\u003c/p\u003e\u003cp\u003eFrom an economic perspective, these findings suggest that firms issuing green bonds can secure funding at a lower cost, enabling them to allocate a greater portion of their resources to environmentally beneficial projects. This can lead to increased long-term cost savings, enhanced financial performance, and a stronger market position, ultimately improving the company's overall value and competitiveness. Additionally, green bonds allow investors to access loans at lower interest rates, potentially incentivizing more companies to adopt environmentally and socially responsible practices (Zhao et al., \u003cspan citationid=\"CR121\" class=\"CitationRef\"\u003e2022\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe study also revealed that CSR expenditures positively and significantly impact the cost of debt, further supporting the study's hypothesis. These findings align with the RBV theory, which suggests that viewing CSR expenditures as strategic assets can enhance a company's reputation and stakeholder relationships, thereby lowering the cost of debt (Khan et al., \u003cspan citationid=\"CR53\" class=\"CitationRef\"\u003e2019\u003c/span\u003e). The results indicate that investments in CSR are valuable assets that improve financial conditions and reinforce competitive advantages.\u003c/p\u003e\u003cp\u003eThis positive relationship is attributed to CSR activities fostering trust among investors and lenders, which diminishes perceived risks associated with the firm and lowers borrowing costs (Bugandwa et al., \u003cspan citationid=\"CR21\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Furthermore, firms engaged in CSR activities are often perceived as more resilient and less vulnerable to regulatory or reputational challenges, contributing to a lower overall cost of debt.\u003c/p\u003e\u003cp\u003eThe economic implications suggest that companies investing significant resources in innovation and growth can access more favorable financing options. Reduced borrowing costs can enhance financial performance and attract socially responsible investors, further strengthening long-term sustainability and market position. Additionally, the positive influence of CSR on credit interest rates can encourage more corporations to prioritize social responsibility, yielding broader economic and social benefits (Schwartz et al., 2017).\u003c/p\u003e\u003cp\u003eThe study also found that sustainability-linked loans have a negative and significant impact on the cost of debt, with this significant effect supporting the study's hypothesis. These findings are consistent with the RBV theory, which suggests that strategically implementing sustainability-linked loans can help firms improve financial efficiency by aligning operations with sustainable standards (Manurung et al., \u003cspan citationid=\"CR71\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). The results provide evidence that loans tied to sustainability can encourage and reward sustainable practices, thereby lowering interest rates.\u003c/p\u003e\u003cp\u003eSustainability-linked loans typically offer more favorable terms, such as reduced interest rates, when specific sustainability goals are met, thus decreasing the overall borrowing cost (Pohl et al., \u003cspan citationid=\"CR81\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). This contributes to the observed negative impact. By engaging in sustainability-linked finance, firms can further lower their borrowing rates, as they are perceived as lower-risk borrowers due to their commitment to ESG criteria.\u003c/p\u003e\u003cp\u003eThese findings hold economic implications for corporations, suggesting that firms securing sustainability-linked loans can significantly reduce their debt burdens, allowing them to allocate more resources toward innovation and sustainability initiatives. Investors who prioritize ESG principles find financially stable companies more attractive, facilitating the achievement of both goals (Ermawati, \u003cspan citationid=\"CR33\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). Furthermore, the growing prevalence of sustainability-linked financing may motivate more enterprises to integrate sustainability into their strategic decisions, resulting in substantial benefits for society, the environment, and financial performance (Derchi et al., \u003cspan citationid=\"CR28\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe results also indicated that investment in renewable energy has a positive and significant impact on the cost of debt, supporting the study's hypothesis. These findings are consistent with the RBV theory, which argues that investing in renewable energy can serve as strategic resources that enhance a firm's long-term competitive advantage (Khanra et al., \u003cspan citationid=\"CR54\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Investing in renewable energy not only increases asset value but also helps lower financing costs by positioning the company as innovative and environmentally conscious (Gawusu et al., \u003cspan citationid=\"CR37\" class=\"CitationRef\"\u003e2022\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eFirms allocating funds toward renewable energy sources often incur reduced financing costs due to government subsidies, incentives, or favorable lending conditions that support clean energy projects (Jin et al., \u003cspan citationid=\"CR48\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). This factor contributes to the positive impact observed. Lenders and investors tend to view firms that invest in renewable energy positively, expecting that such investments will effectively reduce long-term operational risks associated with fossil fuels. Consequently, these firms often benefit from lower interest rates and a reduced perceived level of risk.\u003c/p\u003e\u003cp\u003eFrom an economic perspective, these findings indicate that investing in renewable energy can lower financing costs, allowing companies to redirect funds toward other strategic projects or further portfolio expansion (Sotnyk et al., \u003cspan citationid=\"CR97\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Moreover, this advantage enhances the company's financial performance and strengthens its market position while advancing its environmental goals. This trend could accelerate the adoption of sustainable practices across multiple sectors as firms allocate resources to renewable energy, leading to broader economic and ecological benefits.\u003c/p\u003e\u003cp\u003eThe study found that the moderating relationship between firm age and the issuance of green bonds has a positive and significant impact on the cost of debt. Conversely, the moderating relationship between firm size and the issuance of green bonds has a negative and significant impact on the cost of debt. These findings align with the RBV theory, suggesting that a company's use of strategic resources, like green bonds, can influence the cost of debt, conditioned by factors such as the firm's size and age (Romano et al., \u003cspan citationid=\"CR85\" class=\"CitationRef\"\u003e2024\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe findings support the theory by demonstrating that a company's age positively alters the relationship between the cost of debt and the issuance of green bonds. Established firms with strong reputations and long histories may use green bonds to secure more favorable loan conditions, as lenders perceive them as lower risk. Financial institutions are generally more inclined to offer lower interest rates to well-established companies due to their perceived reliability and stability (Boot et al., \u003cspan citationid=\"CR17\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). This factor likely contributes to the positive effect observed.\u003c/p\u003e\u003cp\u003eConversely, firm size may negatively influence the relationship between green bonds and the cost of debt, suggesting that larger firms face complexities and potential inefficiencies. Larger corporations may experience delays in capitalizing on the benefits of green bonds, resulting in less favorable lending conditions. Additionally, the potential cost savings from issuing green bonds may be counterbalanced by the increased regulatory requirements and scrutiny that larger companies typically face (Zhao et al., \u003cspan citationid=\"CR121\" class=\"CitationRef\"\u003e2022\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThese findings carry financial implications, suggesting that firms should strategically manage their debt costs by considering their age and size when issuing green bonds (Bhutta et al., \u003cspan citationid=\"CR16\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). The issuance of green bonds presents greater benefits for established firms, enabling them to reinvest in growth or sustainability projects while lowering financing costs. However, larger companies may need to enhance their operational efficiency and strategic planning to fully optimize the financial advantages of green bonds and prevent their size from hindering their ability to secure favorable loan terms.\u003c/p\u003e\u003ch2\u003eThe effect of investment in sustainable finance on the cost of equity\u003c/h2\u003e\u003cp\u003eThe study found a positive and significant relationship between green bond issuance and the cost of equity, supporting the study's hypothesis. These results align with RBV theory, which posits that green bonds and other unique resources can influence a firm's financial structure, including its stock price (Chen, \u003cspan citationid=\"CR24\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). The theory is substantiated by the positive impact of these issuances on stock issuance costs, as the market views green bonds as indicative of a company's commitment to sustainability. Despite the premium investors demand for sustainability-focused investments, this approach can enhance the firm's reputation, attract a broader range of investors, and increase demand for its shares (Kalikhan et al., \u003cspan citationid=\"CR50\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThis rationale explains the positive association between green bonds and sustainable initiatives, which yield societal and environmental benefits but also carry risks that may affect returns. Investors may perceive green bonds as evidence that the corporation is making significant investments in sustainability (Agliardi \u0026amp; Agliardi, \u003cspan citationid=\"CR2\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Consequently, to mitigate the perceived risks associated with these investments, investors seek higher returns on equity. Additionally, the long-term investment horizon linked to green bonds may lead stock investors to demand greater returns, indicating a stronger preference for long-term sustainability over short-term financial gains (Yeow \u0026amp; Ng, \u003cspan citationid=\"CR117\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eA financial implication for companies is the need to manage costs associated with equity funding and expenses related to sustainability programs. While issuing green bonds can enhance the firm's reputation and attract socially conscious investors, an increase in the cost of shares may impact the firm's capital structure. Companies should align their cost of equity with their strategic objectives by effectively communicating the long-term benefits of their sustainability efforts to investors and attracting a diverse range of investors who share similar values (Vaupel et al., \u003cspan citationid=\"CR107\" class=\"CitationRef\"\u003e2023\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eCSR expenditures also exhibited a positive and significant effect on the cost of equity, supporting the study's hypothesis. These results are consistent with RBV theory, which indicates that unique resources, such as CSR investments, can influence a firm's financial framework, including its stock price (Hussain et al., \u003cspan citationid=\"CR43\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). This theory is further substantiated by the positive impact of these expenditures on stock issuance costs, as the market views CSR activities as a reflection of a company's commitment to sustainability. Despite the premium investors demand for sustainability-focused investments, CSR activities can improve a firm's reputation, attract a broader range of investors, and increase share demand (Koltonuk, \u003cspan citationid=\"CR56\" class=\"CitationRef\"\u003e2020\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThis rationale clarifies the positive relationship between CSR and sustainable initiatives, which provide societal and environmental benefits but also present risks that may affect returns. Investors may view CSR expenditures as a sign that the corporation is making substantial commitments to these initiatives (Agliardi \u0026amp; Agliardi, \u003cspan citationid=\"CR2\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). To alleviate the perceived risks linked to these investments, they may seek higher returns on equity. Moreover, the long-term nature of CSR investments may lead stock investors to request greater returns, favoring long-term sustainability over short-term financial profits (Hadaś-Dyduch et al., \u003cspan citationid=\"CR39\" class=\"CitationRef\"\u003e2022\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eOne financial implication for companies is the necessity to balance equity funding costs with expenses related to their sustainability programs. While issuing green bonds can bolster a firm's reputation and draw in socially conscious investors, an increase in share costs may affect the firm's capital structure. Companies should synchronize their cost of equity with their overarching strategic objectives by effectively communicating the long-term benefits of their sustainability initiatives to investors and appealing to a broader investor base (Jing et al., \u003cspan citationid=\"CR49\" class=\"CitationRef\"\u003e2023\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThis study found that sustainability-linked loans had a positive and significant impact on the cost of equity, confirming the study's hypothesis. Specifically, the results indicate that sustainability-linked loans serve as strategic assets that can significantly influence a company's financial framework, particularly the cost of equity (Morrone et al., \u003cspan citationid=\"CR75\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). These findings align with RBV theory, which asserts that sustainability-linked loans positively affect equity costs. The positive impact arises from the market's assessment of these loans as a pathway for sustained growth and potential financial obligations that carry uncertainties, affecting the firm's equity expenses (Brunnermeier \u0026amp; Krishnamurthy, \u003cspan citationid=\"CR20\" class=\"CitationRef\"\u003e2020\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe presence of sustainability-related performance targets in sustainability-linked loans accounts for the observed positive relationship. While these loans offer societal and environmental benefits, they also present operational challenges and risks. Given the ambitious nature of these goals, investors may harbor increasing concerns about the company's ability to generate future profits, prompting them to seek higher returns on equity. Investors are inclined to support sustainability-focused projects in exchange for a greater return on investment (Christensen et al., \u003cspan citationid=\"CR26\" class=\"CitationRef\"\u003e2022\u003c/span\u003e), a prudent choice given the long-term commitment and inherent risks associated with such investments.\u003c/p\u003e\u003cp\u003eAn economic implication of these findings suggests that companies must evaluate sustainability-linked loans for alignment with their overall financial strategies regarding terms and objectives. While these loans can elevate share prices and potentially impact profitability, they can also enhance a company's sustainability credentials and attract ethical investors. Firms should strive to demonstrate the financial advantages and enduring value of achieving sustainability goals (Tseng, \u003cspan citationid=\"CR105\" class=\"CitationRef\"\u003e2021\u003c/span\u003e) to mitigate the effects of rising equity costs associated with these loans.\u003c/p\u003e\u003cp\u003eThe study revealed a positive and significant relationship between investments in renewable energy and the cost of equity, supporting the hypothesis. These findings align with RBV theory, which posits that investing in renewable energy as a strategic resource can significantly impact a company's financial structure, specifically its cost of equity (Dionysus \u0026amp; Arifin, \u003cspan citationid=\"CR29\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). Despite the potential for these investments to enhance sustainability and long-term competitive advantage, investors may exhibit greater risk aversion and consequently demand higher prices for shares.\u003c/p\u003e\u003cp\u003eA key reason for this positive relationship is that investments in renewable energy often entail substantial initial costs and long payback periods, complicating cash flow projections (Zimon \u0026amp; Zimon, \u003cspan citationid=\"CR122\" class=\"CitationRef\"\u003e2020\u003c/span\u003e). The anticipated risks associated with these long-term investments, stemming from inherent uncertainties, may lead investors to expect higher returns on shares. Additionally, the regulatory and technical risks linked to renewable energy projects may contribute to perceptions of heightened risk, further increasing the cost of equity (Hoang et al., \u003cspan citationid=\"CR42\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eAn important financial consideration for corporations is the need to balance the benefits of investing in renewable energy against the potential for higher equity costs. While these investments can establish the company as a leader in sustainability and generate additional revenue, the rising cost of equity associated with them may ultimately diminish profitability over time. To address this issue, companies should highlight the substantial long-term strategic advantages of investing in renewable energy, such as cost savings, regulatory benefits, and improved market positioning, to persuade investors to accept higher equity costs in the future (Chen \u0026amp; Ma, \u003cspan citationid=\"CR25\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe study found that the moderating relationship between green bond issuance and the size and age of the firm had a positive and significant impact on the cost of equity. Consistent with RBV theory, these findings suggest that green bond issuance can positively influence the cost of equity, provided that the firm's age and size moderate this effect. This discovery offers evidence that green bonds are valuable tools for strategic planning (Bhutta et al., \u003cspan citationid=\"CR16\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). However, the effectiveness of these instruments in reducing financial costs may depend on the company's size and age, potentially leading to higher equity costs.\u003c/p\u003e\u003cp\u003eInvestors often perceive larger, more established organizations as less agile and more risk-averse despite their stability, which explains the favorable association. Sustainability initiatives, such as green bonds, are particularly affected by this perception. As a result, these findings may elevate stock prices, as investors are willing to pay more for a company that demonstrates adaptability and innovation. For established firms, issuing green bonds may signify a significant strategic shift, diverging from conventional business practices (Perkins, \u003cspan citationid=\"CR80\" class=\"CitationRef\"\u003e2021\u003c/span\u003e), which could further increase stock prices and perceived risks.\u003c/p\u003e\u003cp\u003eIssuing green bonds, especially for large corporations, necessitates careful consideration of the economic impacts of managing investor perceptions. While these bonds can enhance a company's sustainability and provide additional financing opportunities, rising stock prices may offset some financial benefits. To address this challenge, companies should emphasize their commitment to green bond initiatives in their long-term strategies (Torvanger et al., \u003cspan citationid=\"CR104\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Highlighting these bonds can inspire future innovation and growth while reassuring investors of the company's capacity to thrive in a sustainable market.\u003c/p\u003e\u003ch2\u003eThe effect of investment in sustainable finance on WACC\u003c/h2\u003e\u003cp\u003eThis study found that green bonds have a positive and significant influence on the WACC, supporting the study's hypothesis. The RBV theory suggests that green bonds act as valuable assets that can enhance a company's financial position (Chen, \u003cspan citationid=\"CR24\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). By optimally leveraging these bonds, firms can decrease their cost of capital and strengthen their capital structure. Implementing this strategy improves financial stability, promotes sustained growth, and cultivates investor trust.\u003c/p\u003e\u003cp\u003eDue to their appeal to investors who value sustainability, green bonds often lead to reduced financing costs for firms, contributing to a positive relationship. In a market with high demand for green assets, firms can lower their overall cost of capital by issuing bonds that offer attractive interest rates (Bhutta et al., \u003cspan citationid=\"CR16\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Corporations that issue green bonds may gain positive publicity for their progressive and environmentally conscious stance. Increased investor confidence and a reduction in perceived risk may lead to a decline in WACC due to this enhanced reputation.\u003c/p\u003e\u003cp\u003eBased on these findings, the economic implication suggests that companies will be better positioned to invest in sustainable projects and development opportunities at a lower cost due to decreased WACC. This will facilitate their ability to finance projects more easily, resulting in enhanced financial performance and a competitive edge in the market. Furthermore, by attracting a broader range of investors who prioritize ESG factors, companies can strengthen their market position and enhance their prospects for sustained expansion (Wei \u0026amp; Chengshu, \u003cspan citationid=\"CR114\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). The issuance of green bonds can accomplish this, positioning the company as a leader in sustainability.\u003c/p\u003e\u003cp\u003eCSR expenditures were found to have a positive and significant effect on WACC, further supporting the study's hypothesis. This research aligns with the well-established claim of the RBV theory that CSR activities are crucial for developing an organization's intangible assets, such as its reputation and stakeholder trust (Salam \u0026amp; Jahed, \u003cspan citationid=\"CR88\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). These enhancements can lead to favorable financing terms and overall financial performance, substantially impacting capital expenditures and reducing perceived risk for investors and creditors. Prioritizing CSR improves market position and ensures long-term viability.\u003c/p\u003e\u003cp\u003eOrganizations that allocate resources to CSR often experience decreased operational risk, highlighting its beneficial effects. Creditors and investors generally view a corporation's commitment to social responsibility positively, potentially resulting in diminished returns on invested capital and loans (Attig, \u003cspan citationid=\"CR14\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). Effective CSR programs can reduce WACC, improve cash flow stability, and generate operational improvements and cost reductions.\u003c/p\u003e\u003cp\u003eBusiness enterprises can dedicate more resources to innovation and growth due to the decreased financing costs associated with a lower WACC. The company's financial flexibility enables it to actively pursue strategic initiatives aligned with its CSR goals, further strengthening its competitive edge (Samans \u0026amp; Nelson, \u003cspan citationid=\"CR89\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Moreover, by enhancing social and environmental performance through CSR investments, companies can attract investors who prioritize sustainability, expanding their investor base and enhancing long-term viability and profitability.\u003c/p\u003e\u003cp\u003eThis study observed a positive and significant relationship between sustainability-linked loans and WACC, supporting the study's hypothesis. The findings corroborate the RBV theory, which posits that a firm's resources significantly improve with access to sustainable finance (Hussain et al., \u003cspan citationid=\"CR43\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). This level of access empowers organizations to launch significant projects that create enduring value. By employing sustainable financial decisions, corporate entities can achieve a more robust competitive edge, improved operational effectiveness, and better resource allocation towards innovative initiatives. This strategic alignment with sustainable practices collectively enhances the company's resilience and growth.\u003c/p\u003e\u003cp\u003eThese sustainability-linked loans may include incentives for achieving specific social or environmental performance goals, which could explain the positive relationship between the two. By mitigating perceived risk and lowering capital expenditures, a company's commitment to sustainability can improve its reputation and strengthen relationships with key stakeholders (Landi et al., \u003cspan citationid=\"CR60\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Firms achieving these sustainability goals may also qualify for enhanced financing conditions, further decreasing their WACC.\u003c/p\u003e\u003cp\u003eThe results of this study have economic implications for firms, suggesting that a lower WACC facilitates funding for new investments and projects, allowing them to pursue innovative initiatives that prioritize sustainability. By integrating sustainability activities into their financial strategies, companies can broaden their potential investor base by attracting socially aware individuals and groups (Panagopoulos \u0026amp; Tzionas, \u003cspan citationid=\"CR79\" class=\"CitationRef\"\u003e2023\u003c/span\u003e). Implementing this approach not only improves financial performance but also establishes the company as a leader in sustainability, potentially increasing its market share and profitability.\u003c/p\u003e\u003cp\u003eThe study revealed that investment in renewable energy had a positive and significant impact on WACC, supporting the study's hypothesis. These findings align with the RBV theory, which suggests that strategic investments in sustainable resources can significantly enhance a firm's competitive advantage (Tan et al., \u003cspan citationid=\"CR102\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Prioritizing sustainability enables organizations to reduce capital expenditures, attract socially responsible investors, and improve operational efficiency. By prioritizing sustainable resources, companies can foster enduring economic success and strategically position themselves in their markets, enabling them to adapt seamlessly to changing consumer preferences and regulatory requirements.\u003c/p\u003e\u003cp\u003eAllocating resources to renewable energy projects yields positive outcomes for a company's sustainability reputation, appealing to socially responsible investors (Camilleri, \u003cspan citationid=\"CR22\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Increased demand for the company's shares may lead to a decrease in WACC and a reduction in the cost of equity. Corporations that invest in renewable energy sources may be eligible for government subsidies and incentives, leading to increased cash flow and reduced financing expenses, further contributing to a lower WACC.\u003c/p\u003e\u003cp\u003eThese findings have significant economic implications for enterprises, suggesting that a lower WACC encourages companies to allocate resources toward capital-intensive projects, fostering innovation and economic expansion in emerging markets. By investing in renewable energy, enterprises can protect themselves against fluctuations in fossil fuel prices and comply with climate change requirements (Zhao et al., \u003cspan citationid=\"CR120\" class=\"CitationRef\"\u003e2024\u003c/span\u003e). This approach serves a dual purpose: it preserves the company's financial solvency while providing a competitive advantage in an increasingly environmentally conscious market.\u003c/p\u003e\u003cp\u003eThis study also revealed that the moderating relationship between the issuance of green bonds and a firm's size and age has a positive and significant impact on WACC. The findings support the RBV theory, which posits that a firm's financial success is significantly influenced by its unique resources and capabilities. The maturity and size of a corporation substantially affect its ability to utilize these resources efficiently. Larger, more established firms benefit from greater access to intangible assets, such as brand recognition and industry expertise, providing them with a competitive advantage in the market and leading to stronger financial results (Iriyanto et al., \u003cspan citationid=\"CR45\" class=\"CitationRef\"\u003e2021\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eSmaller companies may lack the financial resources of established firms, requiring them to demonstrate innovation and develop creative strategies to compete effectively. This perspective argues that an organization's size and longevity are crucial elements in the development and preservation of its most important resources, ultimately enhancing its long-term performance.\u003c/p\u003e\u003cp\u003eOne factor contributing to this positive result is the ability of larger firms to leverage their scale when negotiating prices for green bonds. Investors may perceive a company as riskier due to its size and maturity, potentially increasing its WACC (Franc-Dąbrowska et al., \u003cspan citationid=\"CR36\" class=\"CitationRef\"\u003e2021\u003c/span\u003e). Companies with a longer history may possess greater credibility, which is beneficial for issuing green bonds. However, they may also face challenges in adapting to new sustainable standards, which could increase their capital expenditures.\u003c/p\u003e\u003cp\u003eThese findings have economic implications for firms, suggesting that they may raise the threshold rate for acceptable investments, complicating their ability to invest in new projects or expand existing operations. The reluctance of enterprises to adopt ecological initiatives could undermine their long-term sustainability and growth prospects. Optimal management of these relationships can provide firms with a competitive edge in a market that prioritizes sustainability (Kumar et al., \u003cspan citationid=\"CR57\" class=\"CitationRef\"\u003e2022\u003c/span\u003e). Adopting this strategy enhances their financial performance, establishes a favorable market position, and appeals to environmentally conscious investors.\u003c/p\u003e\u003ch2\u003eDealing with endogeneity and assessing the GMM model’s validity\u003c/h2\u003e\u003cp\u003eAfter meticulously detecting endogeneity using the Durbin-Wu-Hausman (DWH) tests, systematic steps were taken to address the issue. The first step involved including dependent variables as independent dynamic variables in the regression analysis, which helped eliminate the presence of endogeneity among the independent variables.\u003c/p\u003e\u003cp\u003eIn the second step, we lagged all independent variables deemed endogenous, employing internal instrumental variables to resolve the endogeneity issues. This approach significantly enhances current predictions by reducing biases from unobserved shocks, leading to more reliable and robust outcomes.\u003c/p\u003e\u003cp\u003eIn the third step, we introduced external instrumental variables, such as total fixed assets, research and development expenditures, capital expenditures, and brand values, into the model, addressing the endogeneity concern. This introduction of exogenous instruments substantially improved the robustness of our regression model.\u003c/p\u003e\u003cp\u003eA range of measurement indices was used to determine the validity of the GMM model results. The first index employed was the Arellano-Bond test, where AR(1) is statistically significant and AR(2) is statistically insignificant, indicating the validity of the GMM model results. Additionally, the AR(2) results show no serial correlation (Mensah et al., \u003cspan citationid=\"CR74\" class=\"CitationRef\"\u003e2024\u003c/span\u003e).\u003c/p\u003e\u003cp\u003eThe Sargan test was conducted to assess whether the instrumental variables introduced into the model were exogenous or endogenous. The statistically insignificant results from the Sargan tests indicate that the instrumental variables are exogenous, a finding consistent across all models.\u003c/p\u003e\u003cp\u003eThe Hansen J-test provides evidence that the instruments do not have a strong or perfect relationship with the error terms. The Hansen tests yielded statistically insignificant results, which fall between the thresholds of 0.10 and 0.30 (Roodman, \u003cspan citationid=\"CR86\" class=\"CitationRef\"\u003e2009\u003c/span\u003e). Hansen test results below the threshold of 0.10 and above the threshold of 0.30 suggest the overall invalidity of the GMM model results.\u003c/p\u003e\u003cdiv class=\"gridtable\"\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c1\" colnum=\"1\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c2\" colnum=\"2\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c3\" colnum=\"3\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c4\" colnum=\"4\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c5\" colnum=\"5\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c6\" colnum=\"6\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c7\" colnum=\"7\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c8\" colnum=\"8\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c9\" colnum=\"9\"\u003e\u003c/div\u003e\u003cdiv align=\"left\" class=\"colspec\" colname=\"c10\" colnum=\"10\"\u003e\u003c/div\u003e\u003ctable float=\"Yes\" id=\"Tab7\" border=\"1\"\u003e\u003ccaption language=\"En\"\u003e\u003cdiv class=\"CaptionNumber\"\u003eTable 7\u003c/div\u003e\u003cdiv class=\"CaptionContent\"\u003e\u003cp\u003eTwo-step GMM (Difference GMM)\u003c/p\u003e\u003c/div\u003e\u003c/caption\u003e\u003ccolgroup cols=\"10\"\u003e\u003c/colgroup\u003e\u003cthead\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c1\"\u003e\u0026nbsp;\u003c/th\u003e\u003cth align=\"left\" colspan=\"3\" nameend=\"c4\" namest=\"c2\"\u003e\u003cp\u003eCost of debt\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colspan=\"3\" nameend=\"c7\" namest=\"c5\"\u003e\u003cp\u003eCost of equity\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colspan=\"3\" nameend=\"c10\" namest=\"c8\"\u003e\u003cp\u003eWACC\u003c/p\u003e\u003c/th\u003e\u003c/tr\u003e\u003ctr\u003e\u003cth align=\"left\" colname=\"c1\"\u003e\u003cp\u003eVariables\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c2\"\u003e\u003cp\u003eModel 1\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c3\"\u003e\u003cp\u003eModel 2\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c4\"\u003e\u003cp\u003eModel 3\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c5\"\u003e\u003cp\u003eModel 1\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c6\"\u003e\u003cp\u003eModel 2\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c7\"\u003e\u003cp\u003eModel 3\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c8\"\u003e\u003cp\u003eModel 1\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c9\"\u003e\u003cp\u003eModel 2\u003c/p\u003e\u003c/th\u003e\u003cth align=\"left\" colname=\"c10\"\u003e\u003cp\u003eModel 3\u003c/p\u003e\u003c/th\u003e\u003c/tr\u003e\u003c/thead\u003e\u003ctbody\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eDependent variables (-1)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.605 ***\u003c/p\u003e\u003cp\u003e(0.011)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.602 ***\u003c/p\u003e\u003cp\u003e(0.012)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.591 ***\u003c/p\u003e\u003cp\u003e(0.014)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.148 ***\u003c/p\u003e\u003cp\u003e(0.011)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.142 ***\u003c/p\u003e\u003cp\u003e(0.011)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.147 ***\u003c/p\u003e\u003cp\u003e(0.011)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.486 ***\u003c/p\u003e\u003cp\u003e(0.011)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.485 ***\u003c/p\u003e\u003cp\u003e(0.011)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.486 ***\u003c/p\u003e\u003cp\u003e(0.011)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eGreen bond issued\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.327 ***\u003c/p\u003e\u003cp\u003e(0.090)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.241 ***\u003c/p\u003e\u003cp\u003e(0.093)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.284 ***\u003c/p\u003e\u003cp\u003e(0.114)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.182 ***\u003c/p\u003e\u003cp\u003e(0.061)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.282 ***\u003c/p\u003e\u003cp\u003e(0.173)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.196 ***\u003c/p\u003e\u003cp\u003e(0.043)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.728 ***\u003c/p\u003e\u003cp\u003e(0.116)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.813 ***\u003c/p\u003e\u003cp\u003e(0.117)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.795 ***\u003c/p\u003e\u003cp\u003e(0.126)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eCSR expenditures\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.713 ***\u003c/p\u003e\u003cp\u003e(0.239)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.135 ***\u003c/p\u003e\u003cp\u003e(0.023)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.305 *\u003c/p\u003e\u003cp\u003e(0.113)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.505 ***\u003c/p\u003e\u003cp\u003e(0.202)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.161 ***\u003c/p\u003e\u003cp\u003e(0.021)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.120 ***\u003c/p\u003e\u003cp\u003e(0.031)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.165 ***\u003c/p\u003e\u003cp\u003e(0.032)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.214 ***\u003c/p\u003e\u003cp\u003e(0.046)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.065 ***\u003c/p\u003e\u003cp\u003e(0.023)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eSustainability linked loans\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-0.331 ***\u003c/p\u003e\u003cp\u003e(0.049)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-0.318 ***\u003c/p\u003e\u003cp\u003e(0.050)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-0.293 ***\u003c/p\u003e\u003cp\u003e(0.056)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.394 ***\u003c/p\u003e\u003cp\u003e(0.076)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.396 ***\u003c/p\u003e\u003cp\u003e(0.080)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.379 ***\u003c/p\u003e\u003cp\u003e(0.078)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.610 ***\u003c/p\u003e\u003cp\u003e(0.073)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.872 ***\u003c/p\u003e\u003cp\u003e(0.073)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.523 ***\u003c/p\u003e\u003cp\u003e(0.072)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eInvestment in renewable energy\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.525 ***\u003c/p\u003e\u003cp\u003e(0.056)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.502 ***\u003c/p\u003e\u003cp\u003e(0.058)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.571 ***\u003c/p\u003e\u003cp\u003e(0.072)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.412 ***\u003c/p\u003e\u003cp\u003e(0.081)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.443 ***\u003c/p\u003e\u003cp\u003e(0.088)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.417 ***\u003c/p\u003e\u003cp\u003e(0.091)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.852 ***\u003c/p\u003e\u003cp\u003e(0.075)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.872 ***\u003c/p\u003e\u003cp\u003e(0.073)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.899 ***\u003c/p\u003e\u003cp\u003e(0.081)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFirm age\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.047 ***\u003c/p\u003e\u003cp\u003e(0.008)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.079 ***\u003c/p\u003e\u003cp\u003e(0.028)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.053 ***\u003c/p\u003e\u003cp\u003e(0.008)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.516 ***\u003c/p\u003e\u003cp\u003e(0.078)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.167 ***\u003c/p\u003e\u003cp\u003e(0.021)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.487 ***\u003c/p\u003e\u003cp\u003e(0.080)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.068 ***\u003c/p\u003e\u003cp\u003e(0.009)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.025 ***\u003c/p\u003e\u003cp\u003e(0.003)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.063 ***\u003c/p\u003e\u003cp\u003e(0.009)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eFirm size\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e-0.432 ***\u003c/p\u003e\u003cp\u003e(0.090)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-0.467 ***\u003c/p\u003e\u003cp\u003e(0.090)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e-0.552 ***\u003c/p\u003e\u003cp\u003e(0.132)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.449 ***\u003c/p\u003e\u003cp\u003e(0.103)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.750 ***\u003c/p\u003e\u003cp\u003e(0.239)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.219 ***\u003c/p\u003e\u003cp\u003e(0.048)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.707 ***\u003c/p\u003e\u003cp\u003e(0.107)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.717 ***\u003c/p\u003e\u003cp\u003e(0.107)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.678 ***\u003c/p\u003e\u003cp\u003e(0.134)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eLeverage\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.473 ***\u003c/p\u003e\u003cp\u003e(0.102)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.483 ***\u003c/p\u003e\u003cp\u003e(0.009)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.489 ***\u003c/p\u003e\u003cp\u003e(0.105)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.209 ***\u003c/p\u003e\u003cp\u003e(0.005)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.283 ***\u003c/p\u003e\u003cp\u003e(0.006)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.226 ***\u003c/p\u003e\u003cp\u003e(0.005)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.009 ***\u003c/p\u003e\u003cp\u003e(0.001)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.008 ***\u003c/p\u003e\u003cp\u003e(0.001)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.008 ***\u003c/p\u003e\u003cp\u003e(0.001)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eGreen bond * Age\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e-0.377 ***\u003c/p\u003e\u003cp\u003e(0.045)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.808 ***\u003c/p\u003e\u003cp\u003e(0.335)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.523 **\u003c/p\u003e\u003cp\u003e(0.247)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u0026nbsp;\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eGreen bond * Size\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.704 ***\u003c/p\u003e\u003cp\u003e(0.179)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.358 ***\u003c/p\u003e\u003cp\u003e(0.092)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u0026nbsp;\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.833 ***\u003c/p\u003e\u003cp\u003e(0.182)\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eNumber of observations\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e3632\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e3632\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e3632\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e3632\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e3632\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e3632\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e3632\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e3632\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e3632\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eAR (1)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.005\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.003\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.001\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.000\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.012\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.021\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.019\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eAR (2)\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.534\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.562\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.589\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.623\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.642\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.668\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.813\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.834\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.845\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eSargan test\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.333\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.356\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.332\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.578\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.601\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.689\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.500\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.555\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.599\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003ctr\u003e\u003ctd align=\"left\" colname=\"c1\"\u003e\u003cp\u003eHansen test\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c2\"\u003e\u003cp\u003e0.129\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c3\"\u003e\u003cp\u003e0.135\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c4\"\u003e\u003cp\u003e0.142\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c5\"\u003e\u003cp\u003e0.179\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c6\"\u003e\u003cp\u003e0.185\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c7\"\u003e\u003cp\u003e0.193\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c8\"\u003e\u003cp\u003e0.230\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c9\"\u003e\u003cp\u003e0.256\u003c/p\u003e\u003c/td\u003e\u003ctd align=\"left\" colname=\"c10\"\u003e\u003cp\u003e0.287\u003c/p\u003e\u003c/td\u003e\u003c/tr\u003e\u003c/tbody\u003e\u003c/table\u003e\u003c/div\u003e\u003ch2\u003e*** p \u0026lt; .01, ** p \u0026lt; .05, * p \u0026lt; .1\u003c/h2\u003e\u003cp\u003eAfter addressing all endogeneity issues, the robustness of the results presented in Table\u0026nbsp;\u003cspan refid=\"Tab6\" class=\"InternalRef\"\u003e6\u003c/span\u003e was further demonstrated using the findings from Table\u0026nbsp;\u003cspan refid=\"Tab7\" class=\"InternalRef\"\u003e7\u003c/span\u003e. The notable differences between the results in Table\u0026nbsp;\u003cspan refid=\"Tab7\" class=\"InternalRef\"\u003e7\u003c/span\u003e and those in Table\u0026nbsp;\u003cspan refid=\"Tab6\" class=\"InternalRef\"\u003e6\u003c/span\u003e were observed in the estimated coefficients for the variables and their standard errors. Nevertheless, the results in Table\u0026nbsp;\u003cspan refid=\"Tab6\" class=\"InternalRef\"\u003e6\u003c/span\u003e align with those in Table\u0026nbsp;\u003cspan refid=\"Tab7\" class=\"InternalRef\"\u003e7\u003c/span\u003e concerning the negative or positive significance between the dependent and independent variables. The consistent results across Tables\u0026nbsp;\u003cspan refid=\"Tab6\" class=\"InternalRef\"\u003e6\u003c/span\u003e and \u003cspan refid=\"Tab7\" class=\"InternalRef\"\u003e7\u003c/span\u003e confirm the robustness of the findings.\u003c/p\u003e"},{"header":"Conclusion","content":"\u003cp\u003eThe study examined the impact of investment in sustainable finance on the cost of capital. The selection of companies adhered to rigorous inclusion criteria, and a purposive sampling strategy was employed to collect 18 years of data from 227 companies listed on the London Stock Exchange between 2006 and 2023, sourced from Thomson Reuters Eikon DataStream. The CCMG and two-step GMM estimation methods, known for their accuracy, were utilized for data analysis, ensuring the thoroughness and reliability of the findings.\u003c/p\u003e\u003cp\u003eThe study found that the issuance of green bonds, CSR expenditures, and investments in renewable energy had a positive and significant impact on the cost of debt, cost of equity, and WACC. In contrast, sustainable-linked loans had a negative and significant impact on the cost of debt, while a positive and significant impact was observed on the cost of equity and WACC. Additionally, the moderating relationship between the firm\u0026rsquo;s age and the issuance of green bonds had a positive and significant effect on the cost of debt, cost of equity, and WACC.\u003c/p\u003e\u003cdiv id=\"Sec29\" class=\"Section2\"\u003e\u003ch2\u003eManagerial implication\u003c/h2\u003e\u003cp\u003eGreen bonds, a valuable tool for raising funds, can significantly impact interest rates and reduce financing costs. By demonstrating transparency in the environmental benefits and capital allocation of these bonds, corporations can enhance their appeal to socially conscious investors. Establishing a transparent issuance process and a robust reporting framework for the environmental impact of bond-funded projects is crucial to instilling investor confidence.\u003c/p\u003e\u003cp\u003eAllocating capital toward CSR projects can help reduce the cost of equity. To enhance their brand reputation and attract investment, corporations should focus on sustainability projects that resonate with their stakeholders. Integrating CSR into the company\u0026rsquo;s comprehensive business plan and ensuring stakeholders are well-informed about its CSR activities and achievements are effective approaches. The significant multiplier effect of this phenomenon on investment confidence and customer loyalty underscores the vital role of stakeholder engagement in the process.\u003c/p\u003e\u003cp\u003eSustainability-linked loans, which are positively correlated with equity costs, can serve as a strategic tool for firms to align their financial strategies with sustainability goals. Businesses seeking more favorable financing terms should explore financial institutions offering such loans and ensure they meet all sustainability criteria. Setting specific sustainability targets that, when met, lead to lower interest rates is an effective way to align financial performance with environmental impact.\u003c/p\u003e\u003cp\u003eInvesting in renewable energy is imperative for effectively controlling WACC and overall financial risk. Enterprises should thoroughly examine potential renewable energy projects to ensure the soundness of their investment decisions. This includes collaborating with energy experts to implement economically viable solutions. By broadening their energy portfolios and reducing their vulnerability to regulatory uncertainty and energy price volatility, enterprises can achieve their sustainability goals and secure their financial future.\u003c/p\u003e\u003cp\u003eIntegrating sustainability into firms\u0026rsquo; operational and financial objectives on the London Stock Exchange is essential. Implementing this strategy will strengthen their market position, enhance long-term profitability, and increase shareholder value.\u003c/p\u003e\u003c/div\u003e\n\u003ch3\u003eLimitation of the study\u003c/h3\u003e\n\u003cp\u003eInsufficient data availability prevented some companies from meeting the inclusion criteria. Data for the non-financial companies listed on the London Stock Exchange was obtained from Eikon DataStream. Ultimately, the sample size for this study comprised 227 companies, resulting from a meticulous data-cleaning procedure that eliminated companies with incomplete or missing data.\u003c/p\u003e\u003cp\u003eThis study aimed to address previously overlooked gaps in the literature. However, the limited number of studies in the same topic areas made it impractical to directly compare the findings with previous research. The academic literature review was critically examined to obtain essential information, and a theoretical framework was employed to elucidate the findings of this study.\u003c/p\u003e"},{"header":"Declarations","content":"\u003cp\u003e\u003cstrong\u003eData Availability\u003c/strong\u003e\u003c/p\u003e\n\u003cp\u003eThe data associated with the study will be made available upon reasonable request from the corresponding author.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eEthical approval\u0026nbsp;\u003c/strong\u003e\u003c/p\u003e\n\u003cp\u003eThis article does not contain any studies with human participants performed by any of the authors\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eInformed consent \u0026nbsp;\u003c/strong\u003e\u003c/p\u003e\n\u003cp\u003eThis article does not contain any studies with human participants performed by any of the authors\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eCompeting interests\u003c/strong\u003e\u003c/p\u003e\n\u003cp\u003eThe authors declare that they have no competing interests\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eFunding\u003c/strong\u003e\u003c/p\u003e\n\u003cp\u003eNot applicable\u003c/p\u003e\u003ch2\u003eAuthor Contribution\u003c/h2\u003e\u003cp\u003eROA: Conceptualization, writing \u0026ndash; review \u0026amp; editing, Writing \u0026ndash; original draft, Visualization, Validation, Software, Resources, Project administration. LM: writing \u0026ndash; review \u0026amp; editing, Writing \u0026ndash; original draft Methodology, Investigation, Formal analysis. HIMA: writing \u0026ndash; review \u0026amp; editing, Writing \u0026ndash; original draft, Data curation, Conceptualization. HAO: Writing \u0026ndash; original draft, Investigation, Data curation, Conceptualization, Methodology, Supervision. BAG: Writing \u0026ndash; original draft, Investigation, Data curation, Conceptualization, Methodology, Supervision. All authors have read and agreed to the published version of the manuscript.\u003c/p\u003e"},{"header":"References","content":"\u003col\u003e\n\u003cli\u003eAbrantes, B. F., \u0026amp; Str\u0026ouml;m, E. (2023). 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A broader range of investors, particularly those prioritizing ESG considerations, is typically attracted to these firms. Investors view a high cost of capital as an indicator of high risk, requiring a higher return to mitigate that risk. This study utilized the resource-based view (RBV) theory to examine the impact of investments in sustainable finance on the cost of capital. The selection of companies was guided by rigorous inclusion criteria, and a purposive sampling strategy was employed to collect 18 years of data from 227 companies listed on the London Stock Exchange between 2006 and 2023, using Thomson Reuters Eikon DataStream. The study employed the Common Correlated Effects Mean Group (CCEMG) and two-step Generalized Method of Moments (GMM) estimation methods to analyze the relationships between the variables. The findings indicate that green bonds issued, CSR expenditures, and investments in renewable energy positively and significantly impact the cost of debt, equity, and weighted average cost of capital (WACC). Conversely, sustainable-linked loans negatively and significantly affect the cost of debt. Additionally, the moderating relationship between a firm's age and the issuance of green bonds positively and significantly impacts the cost of debt, cost of equity, and WACC. To enhance their appeal to socially conscious investors, companies should demonstrate transparency regarding their environmental benefits, thereby boosting investor confidence in the organization.\u003c/p\u003e","manuscriptTitle":"The financial benefits of sustainability: Analyzing the impact of sustainable finance on capital costs for London stock exchange firms","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2025-07-21 06:56:35","doi":"10.21203/rs.3.rs-6879927/v1","editorialEvents":[{"type":"communityComments","content":0},{"type":"decision","content":"Revision requested","date":"2025-10-26T05:33:46+00:00","index":"","fulltext":""},{"type":"editorInvitedReview","content":"","date":"2025-08-11T09:01:02+00:00","index":"hide","fulltext":""},{"type":"editorInvitedReview","content":"","date":"2025-08-09T14:29:51+00:00","index":"hide","fulltext":""},{"type":"editorInvitedReview","content":"","date":"2025-08-05T04:16:49+00:00","index":"hide","fulltext":""},{"type":"editorInvitedReview","content":"","date":"2025-08-04T10:48:02+00:00","index":"hide","fulltext":""},{"type":"editorInvitedReview","content":"","date":"2025-08-03T12:01:25+00:00","index":"hide","fulltext":""},{"type":"reviewerAgreed","content":"242545495085666841527534784528603190628","date":"2025-08-01T06:09:01+00:00","index":"hide","fulltext":""},{"type":"reviewerAgreed","content":"186503945561154417679726319092460727096","date":"2025-07-28T16:53:07+00:00","index":"hide","fulltext":""},{"type":"reviewerAgreed","content":"113972847801553484525676464675678565952","date":"2025-07-28T16:52:16+00:00","index":"hide","fulltext":""},{"type":"reviewerAgreed","content":"102162518919632592897222069810858014485","date":"2025-07-28T16:30:10+00:00","index":"hide","fulltext":""},{"type":"reviewerAgreed","content":"188356640782066635980366870617263550566","date":"2025-07-28T16:17:49+00:00","index":"hide","fulltext":""},{"type":"reviewerAgreed","content":"264031735969603554070621118597264657705","date":"2025-07-17T03:53:08+00:00","index":"hide","fulltext":""},{"type":"reviewersInvited","content":"","date":"2025-07-16T21:06:13+00:00","index":"","fulltext":""},{"type":"editorInvited","content":"","date":"2025-07-11T16:12:01+00:00","index":"","fulltext":""},{"type":"editorAssigned","content":"","date":"2025-07-03T06:04:37+00:00","index":"","fulltext":""},{"type":"checksComplete","content":"","date":"2025-07-02T11:48:06+00:00","index":"","fulltext":""},{"type":"submitted","content":"Humanities and Social Sciences Communications","date":"2025-06-12T11:25:47+00:00","index":"","fulltext":""}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"humanities-and-social-sciences-communications","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":false,"externalIdentity":"palcomms","sideBox":"Learn more about [Humanities \u0026 Social Sciences Communications](http://www.nature.com/palcomms/)","snPcode":"41599","submissionUrl":"https://submission.springernature.com/new-submission/41599/3","title":"Humanities and Social Sciences Communications","twitterHandle":"","acdcEnabled":true,"dfaEnabled":true,"editorialSystem":"stoa","reportingPortfolio":"Nature AJ","inReviewEnabled":true,"inReviewRevisionsEnabled":false}}],"origin":"","ownerIdentity":"c63b0034-fdbf-4e99-b1f7-b904dcf0a0e4","owner":[],"postedDate":"July 21st, 2025","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"under-review","subjectAreas":[{"id":51684235,"name":"Business and commerce/Business and management"},{"id":51684236,"name":"Business and commerce/Finance"},{"id":51684237,"name":"Social science/Economics"}],"tags":[],"updatedAt":"2026-02-24T18:08:48+00:00","versionOfRecord":[],"versionCreatedAt":"2025-07-21 06:56:35","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-6879927","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-6879927","identity":"rs-6879927","version":["v1"]},"buildId":"8U1c8b4HqxoKbykW_rLl7","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}