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Exploring the impact of green bonds on sustainable development And financial markets: an ARDL-based causality approach

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  • Wang, Yi
  • Wang, Rui
  • Mason, Tajul Ariffin

Abstract

Green bonds have become a more noticeable instrument of sustainable funding; yet the role they play in terms of sustainable growth and financial stability of the market is underrepresented. The argument presented in this paper fits in this gap by probing the dynamic interaction effect that exists between green bond issuance, and green bond sustainability performance indicators, as well as financial market performance by using the ARDL-based casualty-based logic framework between June 2018 and June 2024. With the ARDL bounds test, Error Correction Model (ECM) and Gregory-Hansen, and thus Toda-Yamamoto tests, an outcome has been revealed that the issuance of green bonds positively implies the aspect of carbon emission issues, renewable energy investments, and stability of the financial market. These results may prove beneficial to policymakers, regulators, and other stakeholders of the market who are concerned with ensuring enhancement of economies that can withstand climate changes through diligent utilization of the platform of a green bond in formulating sustainability-geared investment plans.

Suggested Citation

  • Wang, Yi & Wang, Rui & Mason, Tajul Ariffin, 2025. "Exploring the impact of green bonds on sustainable development And financial markets: an ARDL-based causality approach," Finance Research Letters, Elsevier, vol. 85(PC).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pc:s1544612325012012
    DOI: 10.1016/j.frl.2025.107943
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    References listed on IDEAS

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    1. Tang, Dragon Yongjun & Zhang, Yupu, 2020. "Do shareholders benefit from green bonds?," Journal of Corporate Finance, Elsevier, vol. 61(C).
    2. Flammer, Caroline, 2021. "Corporate green bonds," Journal of Financial Economics, Elsevier, vol. 142(2), pages 499-516.
    3. Torsten Ehlers & Frank Packer, 2017. "Green bond finance and certification," BIS Quarterly Review, Bank for International Settlements, September.
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