Factors influencing green bond yield: Evidence from Asia and Latin American countries

Abstract

Despite numerous studies in the domain of green bonds, a paucity of literature concentrates on emerging countries’ green bonds. To fill this void, this study aims to examine the factors influencing green bond yield in the Asian and Latin American contexts. The data are compiled from the Bloomberg and Fred databases between 2017 and 2022. The panel regression with the Generalized Least Square method was employed. The results reveal that Asian green bonds provide higher yields with less risk to their investors than Latin American green bonds. The regression results of Asian green bonds show negligible effects of all factors, except coupon rate with a positive effect (β = 0.844), indicating its remarkable influence on green bond yield. However, the findings of Latin American green bonds uncover that coupon (β = 0.780), maturity (β = 0.025), and bond rate (β = 2.472) surpass the green bonds yield due to their positive effects, whereas issue size (β = –1.215) causes a reduction in the green bonds yield with their negative effect. Further, Environmental, Social, and Governance disclosure shows a positive (β = 1.611) effect, indicating better yield for investors due to their potential power to vanish greenwashing in these markets. Moreover, interest rate and GDP exert significant positive (β = 0.141) and negative (β = –0.030) effects on green bond yield, respectively. This observation implies that higher lending rates increase bond yield, whereas GDP-led growth provides lower yield due to better economic prospects and high investor demand for the bonds. AcknowledgmentThe authors are grateful to Manipal Academy of Higher Education (MAHE), Manipal, for providing financial assistance in the form of a “JRF Contingency Grant” for this research article.