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Corporate green bonds

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  • Flammer, Caroline

Abstract

I examine corporate green bonds, whose proceeds finance climate-friendly projects. These bonds have become more prevalent over time, especially in industries where the environment is financially material to firm operations. I show that investors respond positively to the issuance announcement, a response that is stronger for first-time issuers and bonds certified by third parties. The issuers improve their environmental performance post-issuance (i.e., higher environmental ratings and lower CO2 emissions) and experience an increase in ownership by long-term and green investors. Overall, the findings are consistent with a signaling argument—by issuing green bonds, companies credibly signal their commitment toward the environment.

Suggested Citation

  • Flammer, Caroline, 2021. "Corporate green bonds," Journal of Financial Economics, Elsevier, vol. 142(2), pages 499-516.
    • Handle: RePEc:eee:jfinec:v:142:y:2021:i:2:p:499-516
    DOI: 10.1016/j.jfineco.2021.01.010
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    More about this item

    Keywords

    Sustainable finance; Climate change; Green bonds; Impact investing; Corporate sustainability;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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