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Green bonds as a tool against climate change?

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Abstract

While green bonds are becoming increasingly popular in the corporate finance practice, little is known about their implications and effectiveness in terms of issuers' environmental engagement. Using matched bond-issuer data, we test whether green bond issues are associated to a reduction in total and direct (scope 1) emissions of non-financial companies. We find that, compared to conventional bond issuers with similar financial characteristics and environmental ratings, green issuers display a decrease in the carbon intensity of their assets after borrowing on the green segment. The decrease in emissions is more pronounced, significant and long-lasting when we exclude green bonds with refinancing purposes, which is consistent with an increase in the volume of climate friendly activities due to new projects. We also find a larger reduction in emissions in case of green bonds that have external review, as well as those issued after the Paris Agreement.

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  • Fatica, Serena & Panzica, Roberto, 2020. "Green bonds as a tool against climate change?," Working Papers 2020-10, Joint Research Centre, European Commission.
    • Handle: RePEc:jrs:wpaper:202010
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    More about this item

    Keywords

    climate change; green bonds; impact investing; corporate sustainability; environment;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects

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