Using a novel worldwide dataset of 5,264 syndicated loans issued to 329 firms from 2006
to 2021, we study how climate-related litigation risk affects firm's cost of borrowing. We find
robust empirical evidence that firms targeted by climate lawsuits pay significantly higher
spreads on their bank loans. These effects are more pronounced for firms with weaker environmental
performance and higher ESG controversies. The results suggest that lender's view
climate litigation as a material risk factor, which is increasingly priced into debt contracts.