Examining the interplay of green bonds and fossil fuel markets: The influence of investor sentiments

Abstract

This study delves into the impact of investor sentiment and the issuance of green bonds on fossil fuel consumption, specifically focusing on three key fossil fuels: crude oil, coal, and natural gas, using data spanning from 2015 to 2022 and concentrating on the top ten environmentally conscious nations globally. The findings reveal that a mere 1% increase in green bond issuance volume correlates with reductions of 0.12%, 0.49%, and 0.09% in crude oil, coal, and natural gas consumption, respectively. Additionally, a 1% enhancement in the investor sentiment index corresponds to decreases in consumption rates of 0.26%, 0.39%, and 0.01% for the same fossil fuels. Furthermore, the presence of a higher number of registered patents significantly contributes to the reduction of coal and crude oil consumption, highlighting the importance of innovation in sustainability efforts. In light of these findings, practical policy recommendations for nations emerge, including the development of robust green bond markets and the promotion of sustainability education. Encouraging sustainable electricity production through private sector involvement and local green initiatives is also advocated.