The Impact of ESG Performance on Financing Costs with the Moderating Role of Green Financing

Document Type : Research

Authors
Tahereh Sajjadirad
Roya Darabi
Department of Accounting, ST.C., Islamic Azad University, Tehran, Iran.
10.22034/smajournal.2025.538173.1101
Abstract
Present study aims to provide a data-driven and scientific examination of the impact of ESG performance on the cost of financing for companies listed on the Tehran Stock Exchange from 2015 to 2023, considering the moderating role of green financing. This research is applied and correlational in nature. Data related to ESG indicators, green financing, and financing costs were collected from financial statements and company reports and analyzed using panel data regression and the test of the moderating effect of green financing. The results showed that better ESG performance is significantly associated with a reduction in companies' cost of financing. Furthermore, the moderating role of green financing significantly strengthens this relationship; specifically, when companies utilize green financing tools, the positive impact of ESG on reducing the cost of financing becomes more pronounced. Among the different dimensions, corporate governance and social responsibility played the greatest roles in reducing the cost of equity and enhancing the trust of financial institutions. Control variables such as profitability and company size had a decreasing effect, while financial leverage had an increasing effect on the cost of financing. The panel model's R² value (0.48) also indicates an adequate explanatory power of the model. Based on statistical evidence and empirical analysis, improving ESG indicators alongside the targeted use of green financing, can create significant benefits for Iranian companies. These findings underscore the necessity of strengthening the ESG rating system, enhancing ESG structures, and developing innovative financial mechanisms to reduce the cost of financing and achieve sustainable growth.

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Strategic Management Accounting
Volume 2, Issue 3
Autumn 2025
Pages 87-110