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Regulatory transparency and cost of ESG debt: Evidence from Latin America and Caribbean

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  • Huang, Bihong
  • Zhu, Kaiying

Abstract

Low- and middle-income countries face climate vulnerability and institutional constraints that hinder sustainable finance. Using bond-level data from Latin America and the Caribbean, this paper examines whether ESG bonds command a pricing advantage and whether regulatory transparency reduces financing frictions. We document a greenium of roughly 100 basis points relative to matched conventional bonds. We further construct an index of ESG disclosure regulation and show that stronger frameworks reduce ESG bond spreads by up to 33 basis points, with larger effects for high-yield and domestic-currency issuances. These findings highlight the role of regulatory transparency in lowering perceived risk and supporting climate finance in emerging markets.

Suggested Citation

  • Huang, Bihong & Zhu, Kaiying, 2026. "Regulatory transparency and cost of ESG debt: Evidence from Latin America and Caribbean," Finance Research Letters, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:finlet:v:95:y:2026:i:c:s1544612326002631
    DOI: 10.1016/j.frl.2026.109736
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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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