The Determinants of Green Bond Issuance in Indonesia: An Analysis of Sustainable Financial Instruments

This thesis establishes new insights into the provision of affordable, operationally efficient rental housing in Australia, within the context of government-supported affordable rental housing schemes. A revision to the Australian ‘Affordable Housing Bond Aggregator’ (AHBA) model is proposed, which includes the integration of a green building mandate on affordable rental housing stock and the utilisation of sustainable financing pathways – notably green bonds. Linkages between the operational utility efficiency of rental housing, sustainable financing avenues, and outcomes for low- and middle-income households are investigated; furthermore, how ongoing operational utility efficiencies, achieved through green building principles, may be captured to improve the efficacy of government social support schemes as a system is examined. This research has implications for the Australian affordable housing sector. This thesis applies a mixed-methods approach to address and synthesise the following three concepts: 1) Green building principles as a demand-side subsidy to improve tenant outcomes within affordable housing policy. A case study is presented. 2) The application of green versus conventional housing bonds as a financing mechanism for affordable housing policy. A systematic literature review is undertaken to reveal plausible financing cost savings and ‘green premium’ determinants. 3) Lastly, an operational system dynamics model is developed to examine the outcomes of the AHBA in South East Queensland, and also to forecast the implications for integrating green building principles, including green bonds, against environmental, social, and economic outcomes. First, this research engages with a case study to investigate the financial value of green building principles within South East Queensland. Rising energy, water, and gas costs exert increasing financial pressure on low- and middle-income rental households, which are often subject to issues of split-incentives. The split-incentive problem concerns the lack of appropriate incentives for landlords to implement green building principles and associated utility efficiency measures. Little incentive exists for landlords to invest in operational utility efficiency upgrades to rental housing within existing Australian affordable housing policy. In addition, the financial implications of doing so are not well understood. This study therefore seeks to identify the financial value of green building principles over a 10-year rental tenancy. A multi-residential affordable housing development in Yeronga, Brisbane is analysed from the design stage; two scenarios are studied to determine the estimated household utility savings between a ‘Business as usual’ and ‘Green-certified’ case. Operational utility efficiencies, achieved through green building principles, are modelled to reduce total housing costs by 1.7–3.8% (an average approximate saving of AUD $5–18 per week) for one- and four-person low-income households, respectively. These savings are regarded as a demand-side subsidy that directly benefit tenants. The costs for implementing green certification are assessed, which are found to be marginal when compared with the longer-term operational cost savings of the improvements. The findings provide evidence to suggest that a case exists within public affordable housing policy to expand on the conceptual notion of ‘housing assistance’ from a direct discount to market rent approach (or cash subsidy) to one that includes a broader set of factors – such as operational utility efficiency. The study proposes that incentives provided under government-supported affordable housing policy offer an avenue for mediating split-incentive problems through an incentive structure that utilises a mix of demand- and supply-side subsidies to reduce housing stress for low- and middle-income households, and to promote the supply of affordable housing options. The implications of the study relate to innovative perceptions of affordable rental housing subsidies through green building practices. The second study employs a systematic literature review to investigate plausible debt financing benefits for affordable housing policy by engaging with the green bond market. The green bond market is emerging as an impactful financing mechanism towards climate change mitigation efforts. Studies have revealed the notion of a ‘green premium’ or ‘greenium’ within green bond pricing, including insights into influential characteristics and the drivers that govern it. However, methodological heterogeneity among these studies has resulted in general ambiguity regarding a consensus over the existence of the green premium. This research addresses this gap through a systematic literature review that aims to establish a consensus on the existence – or nonexistence – of a green premium in the green bond market. The review examines studies published between 2007 and 2020. A ranking of the green bond characteristics most likely to exhibit a green premium is organised, including a framework of driving factors. The findings confirm a consensus on the existence of a green premium within 56% of primary and 70% of secondary market studies, particularly for those green bonds that are government-issued, investment grade, and that follow defined green bond governance and reporting procedures. The green premium varies for the primary market; however, an average green premium of −1 to −9 basis points on the secondary market is observed. The study has implications for bond pricing theory by suggesting that future bond pricing should consider noneconomic motives of investors, such as environmental preferences. Furthermore, they suggest plausible financing benefits should future Australian affordable housing policy integrate a mandate for green building certification. This is particularly the case for the AHBA with regards to linkages between a large pool of green-certified housing assets and government-issued housing bonds. Lastly, the thesis organises the concepts of green building and sustainable financing into an operational system dynamics model. System dynamics is a method for analysing the dynamic complexity of social systems with a strong emphasis on computer simulation. Building on the aforementioned foundation studies, the model is framed around the recently introduced AHBA policy framework. Its purpose is to assess two policy scenarios: a business as usual and a green-building policy scenario. The latter establishes a mandate on green building standards within affordable rental housing together with the use of green versus conventional bonds. The impact on social, environmental, and economic outcomes of the framework over a 20-year horizon is assessed. The boundary of the model is within the South East Queensland metropolitan area of Australia. Overall, it is found that the green building framework will deliver 2.37% less housing due to higher initial capital costs. However, green affordable housing delivers substantial long-term energy and water efficiency benefits, improved affordability for tenants due to reduced utility costs, deferred water and energy infrastructure benefits, and considerable contributions towards Australia’s carbon emission reduction targets. Tenants are expected to benefit from a 45–59% reduction in energy and a 27% decrease in water bills. Moreover, a shift to affordable green building policy could contribute to 2.9% of Australia’s Conference of Parties 2030 carbon emissions reduction target if applied nationally. The thesis concludes with a sensitivity analysis, revealing policy refinement recommendations that would yield the benefits of green affordable housing without sacrificing the small reduction in housing stock delivered by the proposed program. It is determined that a green building grant provided to developers would mitigate the reduction in affordable housing supply, and at a net financial cost that is lower than the aggregated benefit. Overall, this research has implications for the future of Australian affordable housing policy through providing evidence to suggest that a focus on green building principles at a policy level may offer a broad base of economic, environmental, and social benefits, which are detailed in this thesis.

This paper analyzes the global and European green bond markets from different perspectives. The paper uses data on green bond issues on the global and European green bond market, in the period from 2013 to 2023. Research results show that the issuance of green and other sustainability-related revenue use bonds has increased in recent years. Europe remains the largest issuance region, accounting for more than half of global issuance. Green bond issuance globally and in Europe has experienced a tumultuous couple of years after reaching record highs of USD 575 billion and USD 326 billion in 2021, respectively. In 2023, Europe's green bond issuance recovered 11% year on year to USD 341 billion. It slightly outperformed the global markets, which recorded 10% growth to reach USD 581 billion. In line with 2022, the corporate sector fueled 2023 green volume, contributing 57% of issuance. Corporate issuers in Europe are mostly dominated by the energy, utilities, automotive, transport, and building sectors, all of which have hystorically been dependent on fossil fuels. Analysis of the capital markets in Bosnia and Herzegovina (BiH) indicates that the green bond market exists, and it started in 2023 when the first issue of green bonds was announced by a commercial bank on the local capital market (Banja Luka Stock Exchange). The key barriers to the development of the green bond market are the lack of appropriate institutional arrangements for green bond management, the issue of minimum size, and the high transaction costs associated with issuing green bonds.

Green bonds, a key innovation in sustainable finance, have gained prominence over the past decade by providing a mechanism for financing environmentally-friendly projects. Unlike conventional bonds, green bonds incorporate a "use of proceeds" clause, ensuring that funds are directed toward projects that contribute to sustainability goals. This paper examines different aspects of green bonds and other "labelled bonds," including social and sustainability bonds, and positions them within the context of sustainable business models, particularly Business Models for Sustainability (BMfS). Research significance: Green bonds, which include a "use of proceeds" clause, ensure that funds are allocated to environmentally sustainable projects. Despite the growing interest in green bonds, much of the existing literature has focused on financial metrics such as the "green bond premium" rather than exploring broader implications for sustainability. This research addresses that gap by developing a structural model for green bond pricing and proposing policies to enhance their market appeal. Alternative: EcoBond A, Green Future Bond B, Clean Energy Bond C, Sustainable Growth Bond D, Climate Action Bond E, Renewable Resources Bond F. Evaluation Preference: Interest Rate (%), Environmental Impact (1-10), Project Type Score (1-10), Credit Rating Score (1-10). The results indicate that Climate Action Bond E achieved the highest rank, while Green Future Bond B had the lowest rank being attained. Conclusion: “The value of the dataset for Climate Action Bond E, according to the EDAS method, Green Bonds and Sustainable Finance achieves the highest ranking.”

The green bond market is emerging as an impactful financing mechanism in climate change mitigation efforts. The effectiveness of the financial market for this transition to a low-carbon economy depends on attracting investors and removing financial market roadblocks. This paper investigates the differential bond performance of green vs non-green bonds with (1) a dynamic portfolio model that integrates negative as well as positive externality effects and via (2) econometric analyses of aggregate green bond and corporate energy time-series indices; as well as a cross-sectional set of individual bonds issued between 1 January 2017, and 1 October 2020. The asset pricing model demonstrates that, in the long-run, the positive externalities of green bonds benefit the economy through positive social returns. We use a deterministic and a stochastic version of the dynamic portfolio approach to obtain model-driven results and evaluate those through our empirical evidence using harmonic estimations. The econometric analysis of this study focuses on volatility and the risk–return performance (Sharpe ratio) of green and non-green bonds, and extends recent econometric studies that focused on yield differentials of green and non-green bonds. A modified Sharpe ratio analysis, cross-sectional methods, harmonic estimations, bond pairing estimations, as well as regression tree methodology, indicate that green bonds tend to show lower volatility and deliver superior Sharpe ratios (while the evidence for green premia is mixed). As a result, green bond investment can protect investors and portfolios from oil price and business cycle fluctuations, and stabilize portfolio returns and volatility. Policymakers are encouraged to make use of the financial benefits of green instruments and increase the financial flows towards sustainable economic activities to accelerate a low-carbon transition.

The green bond market is one of the fastest-growing investment areas. As both investors and issuers are showing a growing interest in this area, it is important to gain a better understanding of the associated risks and returns of green bonds compared to those of other asset classes. This study evaluates the dependence structure of the green bond market in relation to selected financial markets under conditions of structural change. Three multivariate GARCH models were used to analyse the volatility and conditional correlation dynamics between the stock market, the conventional bond market, the green bond market and the VIX Index, which was used as an uncertainty measure. All analyses were conducted for the period from 1 July 2009 to 31 December 2023. Our results reveal dependencies between the analysed time series. However, the direction of these correlations changes depending on the period considered. In the first stage (2009–2013), the correlation with the equity market was positive; since 2014, however, it has been negative. A similar pattern emerges for the VIX Index and green bonds. Notably, the correlation coefficients were negative in the initial period, indicating that green bond profitability decreased during periods of high uncertainty. Dynamic conditional correlations demonstrate the most significant change for green and conventional bonds, with the correlation remaining negative or approaching zero until the end of 2013. After this time, it became positive. This may be due to the introduction of green local government bonds in 2012 and corporate green bonds in 2013.

Green bonds have emerged as a critical financial instrument to fund environmentally sustainable projects, aligning with global efforts to combat climate change and promote green infrastructure. This study examines the macroeconomic factors influencing green bond issuance in India, focusing on key determinants such as GDP growth, inflation, interest rates, ESG scores, and bond ratings. By analysing sectoral trends in green finance, the study identifies clean transportation as the leading recipient of green bond investments, followed by renewable energy and waste & water management. The research employs a quantitative approach, utilizing regression and correlation analysis to assess the impact of macroeconomic variables on green bond issuance. The findings suggest that GDP growth has a positive influence, while inflation acts as a deterrent. ESG scores and credit ratings significantly affect investor confidence, with well-governed firms attracting higher investments. Despite regulatory advancements by SEBI and adherence to Green Bond Principles (GBP), challenges such as greenwashing risks, policy inconsistencies, and market volatility persist. The study concludes that green bonds hold immense potential to support India's transition toward a low carbon economy, macroeconomic stability is ensured. Encouraging standardization in ESG assessments, enhancing transparency, and incentivizing underfunded sectors like waste management can further accelerate the growth of green finance. The research contributes to the existing literature by providing country-specific insights into India’s green bond market and offering findings to enhance its effectiveness in sustainable financing. Keywords: Green bonds, Environmentally Sustainable Projects, India’s Green Bond Market, Sustainable Development Goals, Green Finance, ESG Scores, Macroeconomic factors, Climate change, GDP growth, Sustainable financing.

Purpose: The purpose of the article is to conduct a comprehensive study of current trends in the development of the global green bond market, to identify the features of investment in green bonds in the conditions of COVID-19. Design/methodology/approach: The issues of sustainable development and green financing are an urgent agenda today. The key mechanism for solving these issues is placing green bonds on the financial market. Green bonds are an innovative method of financing targeted environmental projects. The theoretical basis of sustainable development is the concept of a green economy, which explains the correlation between economic growth and the state of the environment. At the same time, forming a green economic system is impossible without a stable system of green financing, where one of the most effective tools is the issuance of these bonds. Green bonds will solve both the current problems associated with the coronavirus pandemic and the global challenges of sustainable development and environmental protection. The capacity of the international market of green bonds is still relatively small, but, according to experts, it is very promising. At the same time, the analysis of further prospects for its development requires a more detailed study. For the research, the author used methods of classification and comparison and analysis of statistical data. Findings: The article analyzes the place of green bonds in the market of socially responsible investments. The author considers the geographical aspect of the issue and placement of green bonds and analyzes the monetary and financial features of the issue mechanism of green bonds. The article examines the trend of development of corporate and sovereign debt in the format of green bonds and examines states’ restorative measures for the development of the green bond market. Originality/value: The author concluded that the green bond market is a fast-growing segment of the debt financing market. In addition, significant amounts of liquidity are concentrated in the developed green bond markets, the geography of market development is expanding, and the volume of green bond issues is growing. The states provide vital support for the development of this segment of the debt financing market.KeywordsGreen financeGreen bondsInvestmentsGreen bond marketCOVID-19JEL ClassificationG23O16

Although China’s green bonds started considerably late, they have become an important part of international green bonds. According to the development status of Green bonds in China. In this article, 2-mode network analysis is used to construct the network of the types and issuing places of China’s provincial green bonds. The UCINET software is used to analyze and study the network centrality and singular value decomposition. This paper studies the functions and roles of different issuing places in China’s inter-provincial green bond market from the relationship between the green bond types and issuing places. It is concluded that all issuing places have generally established connections with the green bond market, and the eastern region has obvious advantages in the types and quantity of green bond issuance. There are two specific market clusters in the green bond market: multi-instrument + central and eastern cluster and green corporate bonds + central and western cluster. Some measures are put forward, such as strengthening the regional cooperation capacity of green bonds among regions, delegating power to the lower levels, and stimulating the vitality of green bond issuers.KeywordsGreen bond type2-Mode NetworkSingular value decompositionMarket cluster

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.

Purpose. To substantiate the role of Green Finance and its separate segments for the greening of the national economy in the context of global trends and world practices regarding the transformation of the capital market and compliance with the principles of the European Green Deal; to determine the most effective mechanisms and tools for stimulating the launch and development of the green bond market in Ukraine. To improve methodical approaches to assessing the economic efficiency of investment projects and optimizing the enterprise’s investment program, taking into account the environmental impact factor. Methodology. The theoretical and methodological basis of the research is the theoretical position of scientists in the field of financial support for the development of the green economy; a complex of general scientific and specific methods: system analysis and mathematical statistics; economic and mathematical modeling and logical generalization. Findings. The peculiarities of the transformation of global green bond financing are established. The growth of its role in the diversification of existing sources of financing of the green economy and dominance in the world issue of debt obligations is proven. A green bond model based on the Green Bonds Principles is proposed; a mechanism for stimulating the launch and development of the green bond market in Ukraine, which will be an important step on the way to the implementation of European standards for the development of green energy and environmental protection. It has been proven that the formation of an optimal portfolio of green investment projects must be carried out taking into account environmental impact factors. Originality. In the process of research, it was established that in the conditions of an unstable environment and military operations, the role of new financial instruments, primarily green bonds, in financing environmental projects, providing access to global capital markets and international financial aid programs, is increasing. A green bond model based on the Green Bonds Principles and a mechanism for stimulating the launch and development of the green bond market in Ukraine is proposed. Methodical approaches to evaluating the efficiency of investment processes and optimizing the portfolio of green investment projects have been improved, which, unlike the existing ones, take into account the project’s ecological impact on the environment. Practical value. It consists in the development of proposals to stimulate the development of the green bond market in Ukraine; determination of the optimal investment development program of the enterprise based on the economic-mathematical model of optimization of the net profit of the enterprise, which takes into account the growing influence of environmental factors on investment efficiency indicators.

Subject. The article addresses the green bond pricing as compared to bonds other than green ones. Objectives. The aims are to determine how the fact that a bond is identified as a green one, the issue amount, and the availability of third-party verification, influence the yield to maturity; to make recommendations on effective green bond pricing. Methods. The study employs econometric testing of hypotheses, using the multiple linear regression. The sample includes 318 green and 1695 conventional bonds. Results. Green bonds have a lower yield to maturity in comparison with conventional bonds. The yield to maturity of green bonds with third-party verification is lower, as contrasted with green bonds without verification. Conclusions. The next step in the green bond market development is creating a benchmark yield curve for sovereign green bonds, with parallel issuance of conventional, non-green bonds. The yield curve is crucial for effective bond pricing. Two yield curves, i.e. for green and non-green bonds, will enable investors to estimate the fair price on issuance, as well as to define, if there is a difference in pricing.

This paper aims to inquire empirically about an increasingly important phenomenon in the state and local government bond market -- the issuance of green bonds. Green bonds have the same security as traditional bonds but include a green label to signify that the bond proceeds will be used to finance projects that benefit the environment. We investigate U.S. state and local government green bond trends and characteristics using a database of all green and non-green bonds issued in 2013-2021. We also report findings from our interviews with early issuers and our analysis of more recent green bonds, focusing on external verification and disclosure. From a volume perspective, we find that the municipal green bond market has been dominated by large issuers in several states. However, the issuance of green bonds is more dispersed. The number of states with at least one green bond issuer within a year and the number of unique issuers per year have grown significantly. Water and wastewater projects remain the most common type of state and local government green bonds, but there has been growth in green bonds for housing and public power. One of the biggest changes has been the increase in the use of external parties to verify what constitutes green; however, the reporting of environmental metrics remains limited.

The issue of "green finance" in the modern economy is one of many elements that determine the competitiveness of countries on an international scale. The current climate targets resulting from the desire to shape the correct relationship between economic growth and the natural environment mean the need to incur appropriate financial outlays, the availability of which is often limited. One of the innovative sources of financing pro-environmental projects are green bonds. The aim of the study is to determine the role of green bonds in the development of the Polish economy and to analyze and evaluate the development of the Polish green bond market in comparison to selected European countries. A critical literature review, comparative analysis, and financial data were used in this research. The article is divided into two sections The first part encompasses a literature review that explores the essence of green bonds, considering both the benefits and barriers associated with this type of financing source. The second part comprises the analysis of statistical data. The scope of the study covered green bonds issued in Poland and selected European countries over the years 2018-2022. The conducted research indicates that the green bond market in Poland and selected countries worldwide is developing dynamically, but it faces numerous barriers hindering its growth. Among the most significant ones, it is crucial to point out the lack of uniform standards for green bonds and higher issuance costs compared to traditional bonds.

This chapter analyzes institutional investors' investment in green bonds, focusing on sustainable development financing and portfolio optimization. The research aims to explore the risks and potentials of investing in green bonds by analyzing the regulatory framework, previous research, and market trends. Special attention is given to portfolio optimization through integrating bonds issued according to ESG standards using Markowitz's diversification model. Secondary data sources include the Climate Bonds Initiative and the SP U.S. Municipal Green Bond Index. The results show that the average returns of green municipal bonds are slightly lower compared to conventional municipal bonds in the period from mid-August 2016 to mid-July 2023, but this difference is not statistically significant. This indicates the absence of a green premium or discount for green bonds, aligning with the literature's stance that these bonds do not enjoy particular advantages or penalties in the market compared to conventional bonds. The integration of green bonds into investment portfolios demonstrates a positive impact on returns, risk management, and overall portfolio efficiency, providing significant insights for institutional investors.

Sustainability commitment, environmental achievement, and green bond premium.