Green bond issuance and investor response in an emerging economy: does COVID-19 and issue size moderate the stock market reaction?

China has become one of the major green bond issue countries and is the only developing country. Research on green corporate bonds is currently a novel direction, and very few studies focus on the Chinese market. Researching Chinese corporate green bonds is essential for the Chinese and merging market. This article discusses corporate green bonds in the Chinese market from the perspective of stock market reaction, institutional investor positions and cost of capital. Firstly, the author analyzes the Chinese stock market reaction to the issuance of corporate green bonds by using an event-study methodology. The paper finds that Chinese stock markets respond positively to green bond issuance announcements, but this response reflects speculative trading behavior. Secondly, the author compares the stock positions of institutional investors after the issuance of corporate green bonds and finds that green corporate bond issuance in the Chinese market can attract long-term investors (institutional investors). Finally, this author adopts the exact matching method to verify the cost of capital argument and finds no significant benefit to the cost of capital, which is consistent with prior works.

Green bonds offer investors the opportunity to align their investments with their values and contribute to positive social and environmental impacts. These bonds are a promising tool for channelling investment towards projects that are environmentally friendly and promote the transition to a low-carbon and sustainable economy. Arguably, they play an important role in the fight against climate change and the achievement of sustainable development goals. However, there are not many studies that have examined the impact of green bond issuance on stock market reactions. This study aims to examine the effect of green bond issuance on investor attention and the stock market using route analysis and the SEM-PLS method, either directly or through the inclusion of investor attention as an intervening variable. This study performed content analysis on the annual reports of publicly listed companies in five ASEAN countries over a period of five years. This study demonstrates that investors’ interest in green bonds increases proportionally to their issuance. However, green bond issuance does not significantly influence stock market reactions. In addition, the issuance of green bonds has had no discernible effect on the stock market's response as measured by investor attention. The findings in this study provide some insights on how green bond issuance can influence stock market reactions through investor attention. Investors can use these insights to make future investment decisions, particularly in ASEAN companies.

The real impacts of third-party certification on green bond issuances: Evidence from the Chinese green bond market

Green bond vs conventional bond: Outline the rationale behind issuance choices in China

Going Green: Effect of green bond issuance on corporate debt financing costs

The green bond market's rapid growth has alerted issuers and investors to this sustainable area of investment. This study ascertains whether green bonds are priced lower than conventional bonds—whether a negative green bond premium exists in both Chinese and global bond markets—and the driving forces behind any such green bond premium. First, an event study is set up to observe stock market's reaction upon issuance of green bonds to test whether green bonds are embedded with additional value by improving the issuer's equity market performance. Then, using the matching method and a two-layer regression process, the study estimates the green bond premium in the Chinese and global markets, respectively, and analyses factors affecting the green bond premium. The event study reveals that green bond issuance could reduce the issuer's equity return performance. The regression models found no significant negative green bond premium in either Chinese or global markets, indicating that green bonds are not priced significantly lower than conventional bonds. However, global market models show that issuing green bonds in CNY could reduce the green bond premium, unlike in USD or EUR.

Achieving sustainable development is one of the main issues at the global level and both public and private sector enterprises need to make large – scale investments to fight against climate change. In this respect, green bonds gain importance to raise money for environmentally – friendly projects, especially clean energy. Proceeds from green bonds are earmarked towards financing of investments that have positive environmental impacts. This paper explores the relationship among green bond issuances and stock market reaction with special focus on renewable energy firms. Herein, through a dataset of green bond issuance announcements worldwide by 46 unique firms over the period from 2014 to 2023, we investigate how the share prices respond to such announcements using event – study methodology. From the empirical evidence of the downward stock price movements, we suggest that investors react negatively to the announcement of green bond issuances. In other words, we find significant and negative cumulative average abnormal returns (CAAR) across all the event windows except in the window of [0, 10], meaning that our findings are robust to several alternative event windows. Further, we determine that the share price response, in general, does not differ depending on the use of green bond proceeds and the years.

Purpose The study analyses the impact of green bonds on sustainable energy efficiency in different Asia–Pacific economies. The research evaluates the support provided by green finance towards energy efficiency and low-carbon transformations in upper-middle- and high-income countries of Asia–Pacific. Design/methodology/approach The analysis within this study uses empirical data to understand resource efficiency changes caused by green bonds across the Asia–Pacific region. Panels of data from ten upper-middle- and high-income economies were analysed using an analysis method from 2011 to 2021. The evaluation utilizes different sustainability indices to measure how alterations in independent factors affect resource efficiency levels. The research employs CS-ARDL and analyses short-run and long-run relationships between resource efficiency and green bond issuance through panel data spanning from 2011 to 2021 across ten Asia–Pacific economies. The proposed model assesses intersectional dependencies by investigating five important variables, which include energy intensity, renewable energy consumption and carbon intensity of GDP and government effectiveness and GDP per capita growth. Findings The empirical result of the study shows that green bond issuance develops resource efficiency effectively at long-term timescales. Statistics show that raising green bond issuance by 1% leads to 0.20% better performance on the resource efficiency index (REI). Studies show that renewable energy use along with governance quality characteristics has beneficial results, whereas energy and carbon intensity produce harmful effects. Research limitations/implications Standardized data concerning green bond performance and energy efficiency metrics limit this research. Research should expand to study lasting effects and examine the impact of government policy on boosting the performance of green finance. Practical implications The research gives essential information about green bond structure optimization for policymakers and financial institutions to enhance their economic value and environmental impact. The situation reveals why financial institutions need transparent reporting practices, common impact measurement frameworks and regulatory stimulation to gain business trust in green investments. The study demonstrates how green bonds help organizations implement sustainable strategies by letting them follow worldwide ESG (environmental, social and governance) criteria. The financial access for energy efficiency projects with the help of green bonds manages to fill sustainability infrastructure funding gaps and promotes economic adaptation and resilience. Originality/value The study introduces a novel empirical approach to analysing the impact of green bond issuance on resource efficiency across the Asia–Pacific region, using the CS-ARDL model. Its regional scope, combined with robust statistical techniques and a custom resource efficiency index, brings fresh insights into green finance. It extends the body of knowledge by integrating energy and environmental economics with sustainable finance. The study’s long-run analysis of green bonds’ effectiveness is particularly innovative and relevant.

Under the growing threat of global warming, green bonds have become a pivotal financial instrument to deal with climate change and promote sustainable development. However, the research on the affecting factors of green bond issuance remains scarce in the existing literature, particularly regarding the external influencing factors. In order to study the impact of climate risks faced by enterprises on green bond issuance and its influence mechanism, this paper takes A-share listed companies issuing green bonds in China as samples from 1 January 2000 to 31 December 2022, adopting the Probit model to study how climate risk faced by enterprises influences green bond issuance. The key findings of the research are as follows: the climate risk positively enhances green bond issuance through green transformation and green innovation. In addition, ownership concentration positively moderates the relationship between climate risk and green bond issuance, while managerial overconfidence negatively moderates the relationship. The effect of climate risk on green bond issuance is greater for larger firms, labor-intensive firms and firms with better environmental performance. Moreover, our research enriches green bond issuance theory, further supports the signal theory of green bonds, and provides theoretical guidance for the development of green bonds in China and other emerging market countries.

Which are the factors influencing green bonds issuance? Evidence from the European bonds market

PurposeThe present study examines the rationale behind the increased global presence of corporate green bonds as a green financing tool to facilitate sustainable practices and eco-friendly investing. The authors investigate the intriguing question of whether the companies that issue green bonds are valued more by investors or not, and further extend our analysis by exploring whether the green image of companies helps to minimize the value erosion during a crisis and enhance the resilience of the stocks?Design/methodology/approachTo examine the association between environmental commitments and firm value, the authors use the COVID-19 crisis as an exogenous shock and create a perfect natural setting to eliminate the endogeneity bias from our estimations. Moreover, the authors use propensity score matching to choose a one-to-one match of green bond firms with a larger pool of brown bond firms and eliminate the “size effect” arising out of the disproportionate sample size of green and brown bond firms.FindingsThe results of the study indicate that green bond firms are valued more by investors compared to brown bonds firms. Hence, green bond issuance acts as a strong signal of a firm's environmental commitment and it is well recognized by the investors. One of the possible reasons for a higher value of green bond firms may be due to their ability to arrest value erosion during environmental shocks. The authors could not find any difference in the resilience of green and brown bond firms.Originality/valueThe study contributes to the growing literature in the area of impact investing, specifically on exponentially growing innovative instrument green bond. Our study integrates two areas of research, i.e. corporate finance and impact investing by examining the impact of green bond issuance on firm value and stock market returns. The results would help environmentally sensitive investors to devise their investment portfolios more efficiently.

Despite the substantial increase in green bond issuance over the past decade, evidence on the drivers and costs of corporate green bond issuance is lacking. We develop four novel hypotheses on the determinants of firms’ choice between green and conventional bonds, by connecting the four distinct features of green bonds with relevant theories. We test these hypotheses on a sample of green and conventional bonds issued by US, Western European and Chinese firms between 2014 and 2021, using linear probability models and alternative approaches. Consistent with our hypotheses, we find that firms with higher reputational gains from being seen as green and a stronger focus on eco‐innovation are more likely to issue green instead of conventional bonds. Conversely, we obtain only limited evidence that green bond issuance is driven by the net benefits of additional disclosure and no evidence that green bond issuers cater to time‐varying investor preferences for corporate greenness. Our results, which survive several robustness tests, are relevant for corporate managers, investors and bond market regulators.

This article explores two primary questions: first, whether the issuance of green bonds contributes to environmental protection, particularly regarding their performance after the adoption of net-zero emission policies; and second, whether issuers of green bonds can have economic benefits. Using the Difference-in-Differences (DID) model to analyze green and conventional bonds issued from 2013 to 2023, the study finds no significant correlation between green bond issuance and CO2 emissions following net-zero adoption. Nevertheless, our findings are important and deserve attention as they indicate that the carbon reduction policies have not exerted sufficient pressure on bond issuers to reduce emissions. At the same time, however, a closer examination of issuing entities reveals that those issuing only green bonds tend to have higher ESG ratings, lower CO2 emissions, and lower financing costs. This suggests that such issuers achieve substantial environmental benefits and economic advantages. In contrast, entities issuing both conventional and green bonds do not demonstrate the same environmental benefits. This finding raises concerns about potential greenwashing, suggesting that entities issuing both green and conventional bonds may engage in practices that contradict environmental protection while presenting their activities as environmentally friendly through green bonds. The study also highlights that the impact of bond features on ESG scores and CO2 emissions varies significantly across different types of issuers. Finally, the paper recommends that policymakers strengthen carbon reduction policies, establish mechanisms to prevent greenwashing, and integrate CO2 emissions and ESG factors into assessment systems. Additionally, it calls for special attention to the carbon emissions of entities in low- and middle-income countries, as well as those in the manufacturing sector, to support the healthy development of green finance.

Explaining green bond issuance using survey evidence: Beyond the greenium

Green bonds allocate proceeds towards environmentally beneficial projects and sustainable development goals, distinguishing themselves from traditional bonds primarily in the use of proceeds determination. However, investors often find it challenging to assess the carbon reduction potential of these bonds because of the lack of standardised environmental impact reporting. In response to this, our research constructs a unique set of indicators derived from financial and environmental datasets, using multivariate analysis techniques that can accommodate the detection of both linear and non-linear relationships. A novel method combining kernel Principal Component Analysis (kPCA) and Canonical Correlation Analysis (CCA) is applied to detect spatial–temporal cross-correlation in multivariate datasets. This approach handles variable comparability issues and the differential treatment of categorical and numerical variables. A significant finding of this study emerges when this methodology is applied to financial attributes obtained from green bonds issued by municipal agencies (muni bonds), pollution data and environmental (climate) data from nine California counties.The results of the detailed analysis indicate that there is measurable evidence to indicate relationships between green bond issuance and their use of proceeds for pollution reduction efforts. In particular, the results show a clear and interpretable correlation directly linked to the amount of green bond issuance and the effect this is having on pollution reduction, underscoring the tangible impact these financial instruments have on pollution reduction efforts in California.Conversely, when it comes to detecting spatial–temporal relationships between the use of proceeds from green bond issuance and positive climate change effects, this is inconclusive from the current studies’ analysis. It was found that there were weaker cross-correlation relationships observed between climate and green bond financial data set attributes which is perhaps indicative of the fact that climate change effects take a much longer time frame to occur. As such the findings of the analysis in this regard may not indicate that positive climate change effects are not occurring from green bond initiatives, but rather that the ability to measure detectable improvements to climate with regard to the issuance of green bonds is currently limited and will take longer for such effects to manifest in a statistically detectable fashion from the given data. This is particularly likely to be the case given green bonds are only in their infancy as a financial market, having had the earliest issuance only occurring in the last 15-20 years and only substantial growth in the market over the last 10 years. Therefore, this aspect of the research investigating longer-term climate effects with regard to green bond issuance will take longer to develop.