Private governance schemes for green bond standard: influence on public authorities’ policy making

Abstract

This paper considers the guiding impact of private governance schemes on public authorities' policy-making through a case study on green bond standard. Based on theoretical review of the institutional interplay and private governance scheme, two hypotheses are proposed in this paper: horizontal interplay between transnational private governance schemes can make a particular framework prevalent in given governance area; and prevalent private governance scheme can influence policy making of public authorities through vertical institutional interplay. The argument in this paper supports that internationally-accepted private governance schemes could be in a position to influence policy-making by public authorities. Horizontal interplay in the form of alignment between the Green Bond Principles (GBP) and other private green bond standards reinforces the credibility of the overlapping elements of the private standards. As for vertical level, this paper finds that public authorities at national and regional levels take advantage of the private governance scheme, especially GBP, when developing their own standards and policy frameworks. Private institution's expertise on green bond standards effectively function to help develop coherent green bond standards globally by helping with public authorities' policy development. GBP eventually serves as a model regulation for policy makers as public authorities regard them as market best practice. This further strengthens the credibility of GBP since private governance schemes could attract more users by making it clear that those voluntary private standards are linked with standards and policy frameworks created by public authorities.