Pollution control bonds and environmental performance in energy utility firms: is there an incantation effect?

Abstract

Purpose This study aims to examine the effects of green financing through pollution control bonds (PCBs) on environmental performance. Design/methodology/approach This study is based on a panel of 189 US energy utility firms observed over the period, 2011–2021 ; this study applies Generalized Method of Moments regressions. Findings This study found that PCBs positively affect environmental performance (aggregate measure, greenhouse emissions, waste landfill, waste incineration and waste recycling). These findings remain robust when this study considers alternative measures of PCBs and environmental performance, the quantile regression method and some firms’ attributes such as financial performance and firm age. Practical implications The results indicate that US energy utility firms have to adopt more PCBs. This study helps researchers, practitioners, shareholders, bondholders, equity analysts and local authorities such as the California Pollution Control Financing Authority, municipalities and investors understand PCBs issuance, usefulness and relevance. Originality/value To the best of the authors’ knowledge, this study is the first to explore the effectiveness of PCBs in reducing pollution.