Geopolitical risk, financial conditions, and green bond issuance: Macro-panel evidence from 61 countries

Geopolitical tensions have become increasingly important for global financial stability and sustainable investment. As these pressures intensify, it becomes necessary to understand how they shape environmentally oriented financing decisions. Against this background, this paper examines how geopolitical risk relates to green bond issuance across 61 countries over the period 2000–2018. To do so, we use country-year observations with reported green bond issuance. We employ high-dimensional fixed effects (HD-FE), instrumental variable generalized method of moments (IV-GMM), system generalized method of moments (SYS-GMM), and quantile regressions (QR) to address unobserved heterogeneity, endogeneity, and differences across the issuance distribution. We find a positive average association between geopolitical risk and green bond issuance, although this pattern is not uniform across country groups. In low- and lower-middle-income countries, the association is negative, whereas in upper-middle- and high-income countries it becomes positive. We also find that sovereign credit ratings and foreign technology transfer strengthen this relationship, while inflation weakens it. These results suggest that geopolitical risk is more likely to be associated with stronger green bond issuance where institutional and market conditions are more supportive.