Green Bonds Research Articles

The Impact of Financial Stress and Uncertainty on Green and Conventional Bonds and Stocks: A Nonlinear and Nonparametric Quantile Analysis

This study aims to investigate the impact of financial stress and uncertainty on the returns of green and conventional bonds and stocks in the United States from 2010 to 2022. The research utilizes nonlinear and nonparametric analysis, which includes the quantile-on-quantile and nonparametric causality-in-quantiles approaches to examine the relationship between variables. The data analyzed using R programming language show that financial stress positively impacts the middle quantiles of both conventional and green equity, while financial uncertainty negatively impacts upper quantiles. The study also finds that financial stress has a more significant impact on all types of bonds compared to financial uncertainty, with conventional bonds being more affected. This study proposes a pyramid that classifies financial assets based on their susceptibility to financial stress, which could help investors evaluate risk levels and make better investment decisions. The study recommends that policymakers should encourage green investments by offering incentives, such as tax credits. They should also focus on enhancing the efficiency of volatile assets by implementing new investment rules and regulations.

Green Economics in Global Perspective based on Bibliometric Review

This study presents a comprehensive bibliometric analysis of green economics literature from 1967 to 2024, highlighting thematic clusters, research trends, potential research topics, and author collaborations. The analysis identifies key themes such as green innovation, energy, economic activities, green investment, and policy frameworks, emphasizing the multifaceted nature of the field. Temporal trends reveal a progression from foundational economic activities to a focus on green innovation and integrated policy initiatives. Potential research areas include financial instruments like green bonds, regulatory frameworks, and the economic benefits of sustainable practices. The author collaboration network shows significant cooperative efforts, with tightly-knit clusters of researchers driving advancements in green economics. This interdisciplinary and collaborative nature suggests that future research will benefit from continued partnerships and integrated approaches to sustainability.

Addressing The Importance of Financed Emissions to The Indonesian Financial Sector

Business trends, including the disclosure of financed emissions, drive more precise sustainability reporting. Financed emissions are greenhouse gas emissions from activities or projects sponsored by financial institutions, such as banks, insurance firms, pension funds, and other financial institutions. This concept emerges from an examination of the function of a financial service institution in distributing capital to companies that emit emissions or have a high carbon footprint. This study aims to examine the phenomenon of financed emissions and formulate policy recommendations to disclose financed emissions in Indonesia. Employing a systematic literature review approach, this study discovered various emission accounting standards, including the GHG Protocol, PCAF, and new standards developed by the ISSB and TCFD. The issuance of green bond instruments, sustainable loans, and the formation of carbon exchanges all contribute to Indonesia’s emission accounting reporting regime. Policy recommendations include the development of environmentally sound KYC policies for financial services institutions, the synchronization of business classification according to the Green Taxonomy or KUBL, and proposals for investment emission intensity taxation in Indonesia. However, hurdles to financed emission disclosure include data quality, complexity of the finance transaction structure's complexity, the technology's equivalency, and incomplete standard setting.

Green bonds and sustainable finance: Performance insights and future outlook

This review paper comprehensively analyses green bonds and their role in sustainable finance. It examines green bonds' definition, characteristics, performance, market trends, challenges, and opportunities. Findings reveal that green bonds offer investors an avenue to align financial objectives with environmental goals while generating competitive returns. However, challenges such as standardised definitions and insufficient investable projects hinder market growth. Implications for investors, issuers, and policymakers are discussed, highlighting the importance of integrating environmental, social, and governance factors into decision-making processes. Recommendations include further research to enhance understanding and stakeholder collaboration to promote transparency and accountability. Ultimately, green bonds promise to advance environmental sustainability and combat climate change in a resilient, low-carbon economy.

How do the Green Energy Stocks React to Green Bond Issuances?

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.

The evolution of green fintech: Leveraging AI and IoT for sustainable financial services and smart contract implementation

The convergence of financial technology and sustainability has given rise to green fintech, an innovative field leveraging cutting-edge technologies to address environmental challenges through financial solutions. This review explores the evolution of green fintech, focusing on the transformative roles of Artificial Intelligence (AI), Internet of Things (IoT), and smart contracts in developing sustainable financial services. Through a comprehensive analysis of recent literature and case studies, we examine how AI enhances ESG assessments, enables data-driven sustainable investment strategies, and facilitates green lending practices. We investigate IoT applications in environmental monitoring, supply chain transparency, and smart grid integration, highlighting their contributions to sustainable finance. The implementation of smart contracts for sustainability is explored, discussing their potential in green bonds, carbon credit trading, and renewable energy markets. The paper addresses key challenges facing green fintech, including data quality issues, privacy concerns, and regulatory uncertainties, proposing future directions for research and development. Our findings suggest that the integration of AI, IoT, and smart contracts in green fintech has significant potential to accelerate the transition to a sustainable global economy by embedding environmental considerations into financial decision-making at all levels. This article contributes to the growing body of literature on sustainable finance, providing insights for practitioners, policymakers, and researchers. It underscores the need for a multidisciplinary approach to overcome technological, regulatory, and socio-economic barriers, paving the way for a more sustainable and technologically advanced financial ecosystem.

How does the issuance of green bonds impact stock price crash risk: An analysis utilizing the NCSKEW and DUVOL

China's rapid development in the context of carbon neutrality has positioned it as the global leader in green bond issuance. As the Chinese A-share market continues to slump, adverse shocks are accumulating. Thus, the question arises: How will the issuance of green bonds (GB) impact stock price crash risk (SPCR)? The present study utilizes datasets of Chinese A-share listed firms from 2012 to 2022 and conducts a differences-in-difference analysis to address this inquiry. The findings indicate that issuing GB can significantly reduce SPCR, suggesting that GB plays a stabilizing role in the capital market. This effect remains robust after consideration of parallel trend testing, placebo tests, propensity score matching, replacement of explained variables, and controlling for geographic and industrial factors. The mechanism studies demonstrate that the issuance of GB can effectively alleviate financing constraints faced by companies and reduce SPCR through the financing constraints mechanism. The issuance can also enhance firm exposure and attract investor attention, thereby mitigating SPCR through the investor attention mechanism. The issuance contributes to the formation of a positive reputation image among investors and can diminish SPCR through the investor sentiment mechanism. The heterogeneity analyses show that the depressive effect of issuing GB on SPCR is more pronounced in state-owned enterprises, heavily polluting industries, and regions with a higher degree of marketization. Further discussion suggests that given the influence of externalities, the green signals released when a firm issues GB can spread within the capital market, generating a positive spillover effect on the decrease in SPCR of other firms in the same region and a negative spillover effect on the increase in SPCR of other firms in the same industry. This study not only confirms GB's stabilization role in the capital market, but also offers theoretical insights for improving the institutional design of the green bond market and promoting sustainable green development.

The Effect of Green Bonds on Natural Capital Protection: Worldwide Evidence

The continued destruction of nature, including the degradation of natural capital and biodiversity, threatens ecosystem services and human well-being. Natural capital is crucial for providing the conditions necessary for human survival and ecosystem services. Without protecting natural capital, this degradation will have lasting effects on current and future generations. Existing studies increasingly show that Green Bonds can finance environmental projects effectively, but few have examined their impact on natural capital protection. This study investigates the effect of Green Bonds on natural capital protection globally, using IMF Climate Data and World Bank data from 2019 to 2022. By applying the Green Investment theory and quantile-panel regression analysis, the results show that Green Bonds significantly enhance natural capital protection at the 25th and 50th percentiles. This indicates that countries can improve their natural capital protection through the issuance of Green Bonds. Moreover, the study finds that renewable energy positively correlates with natural capital protection, while population growth and total natural resource rents have negative impacts. Hence, this study recommends that governments prioritize the issuance of Green Bonds to fund environmental initiatives.

Greenwashing in green finance and measures to prevent it

Aim. To study the phenomenon of greenwashing in the spheres of green bonds issuance and banks’ activities.Objectives. To show the degree of study of the problem in foreign and Russian scientific literature; to analyze the methods of combating greenwashing; to estimate the probability of greenwashing in the financial sphere in Russia.Methods. The author used the methods of bibliographic analysis, studied the legislation and documentation of banking organizations in the context of greenwashing prevention.Results. The author traces the growth of cases of greenwashing in the financial sphere, shows the main forms of its manifestation emphasized in modern scientific literature. As a result of the analysis of the European Union (EU) legislation on counteraction to financial greenwashing the ineffectiveness of the EU measures on prevention of unfair behavior of issuers of “green” bonds and banking institutions is proved. The analysis of the Russian practice of green finance shows the low demand for the services of green bond verifiers and the low degree of state control over this sphere, which may affect the spread of financial greenwashing in Russia. Based on the results of the analysis of the sphere of counteraction to greenwashing in the sphere of green finance in Russia, the main directions of improvement of the domestic policy of counteraction to greenwashing are proposed.Conclusions. Greenwashing is an urgent problem for the development of green finance. The measures taken by the EU to regulate the green bond market do not lead to a reduction in greenwashing and even provoke its development. Measures on state control and tougher penalties for greenwashing are more effective than the emphasis on information disclosure. This seems significant not only for the European market, but also for the Russian market, which will have to face this problem. It is necessary to develop measures to detect and overcome unfair behavior of participants of Russian financial markets, including the development of state control mechanisms, a unified methodology for assessing green bonds and issuers’ reporting, as well as the responsibility of issuers and verifiers when greenwashing is detected. Equally important are incentives for banks to finance green projects and control of the banking system in the framework of greenwashing prevention.

Green finance and its role in sustainability in the EU

The aim of this paper is to investigate the role of green finance on sustainability in Germany and the European Union (EU). This aim will be achieved by examining recent data in this field via a panel fixed effect regression model. When comparing Germany and the EU in terms of the value of issued green bonds, the results show that Germany is leading in reducing emissions with several initiatives. One plausible reason could be the higher per-capita income of residents, which enables them to use more energy-efficient technologies than other EU countries. The fixed effect regression results reveal that in Europe, the value of issued green bonds has a negative impact on emissions. Meanwhile, expenditure on environmental protection, fossil fuel subsidies, and environmental tax revenue are counterproductive and do not impact lowering emissions.

Navigating Geopolitical Risks: Deciphering the Greenium and Market Dynamics of Green Bonds in China

Navigating Geopolitical Risks: Deciphering the Greenium and Market Dynamics of Green Bonds in China

Heterogeneous impact of economic and political uncertainty on green bond volatility: Evidence from the MRS-GARCH-MIDAS-Skewed T model

Green bonds attract increasing attention as a new eco-friendly investment product. We explore the heterogeneous impact of low-frequency economic and political uncertainty across high or low uncertainty states on green bond volatility in order to accurately analyze the green bond market risk. To this end, we propose a new Markov regime switching GARCH-MIDAS-Skewed T model, in which the regime switching behavior occurs on the low-frequency long-term volatility. An effective filtering estimation method is put forth by introducing the likelihood of the low-frequency sub-sample set. The evidence supports that there are significant time-varying and state-dependent impacts from uncertainty shocks on the volatility of green bonds, including monetary policy, inflation, and crude oil prices as well as global economic policy and political environment. In addition, we find the counter-cyclical behavior of green bond volatility, which increases in the period of economic recession or financial turbulence with expanding uncertainty. Improving the hedging ability of green bonds against uncertainty risks effectively contributes to low-carbon economic development.

Is the Russian Green Bond Market Strong Enough to Hedge in the Crisis Times?

The scope of this research has two facets. First, we study the spillover effects between the Russian green bonds and the leading capital market’s ‘indexes before and after the February 2022 events. Second, the identified level of asset connectedness permits to identify portfolio management implications for the analyzed assets. To reveal the spillover effects, we applied the vector autoregressive model and created a synthetic index to capture the dynamics of the green bonds market which included 14 green bond issues between 2021 and 2023 in Russia. We analyze oil & gas, electrical utilities, metals & extraction, chemical sectors collectively referred to as “pollution intensive indexes”. The paper contributes by discoveringthat the total connectedness index (TCI) between Russian green bond market and pollution intensive indexes changed over time and increased after the outbreak of the conflict. Additionally, the paper is novel on revealing the relationship between low hedging effectiveness and hedging ratio of green bond and energy, metals and extraction, sustainability and oil and gas indexes which indicate no need for hedging after February events. The optimal bivariate portfolio weights analysis shows that Russian green bonds market is an outstanding instrument for assets portfolio management during geopolitical conflict. These findings have implications for the government and other stakeholders to manage both the contagion and climate risks during the military conflict.

Multiscale quantile dependence between China's green bond and green equity: Fresh evidence from higher-order moment perspective

This study investigates the multiscale quantile dependence between green bond and green equity in China at different moments and investment horizons. A novel Ensemble Empirical Mode Decomposition based Copula Quantile-on-Quantile Regression model (EC-QQR) has been proposed to quantify the multiscale quantile dependence between two green finance markets for different moments. The empirical findings reveal that, first, green bonds have positive correlations with green equities at kurtosis and negative correlations at skewness. Second, the “tail effect” can be found in extreme quantiles for most short- and medium-terms. Third, the rolling window analysis provides evidence of dynamic dependence, especially for the kurtosis moment in the short term, and interdependence is susceptible to major events such as the Sino-US trade war and COVID-19. These findings have implications for investment strategies and risk management in the green finance markets.

Exploring sustainable finance mechanisms for green energy transition: A comprehensive review and analysis

This study elucidate the role of sustainable finance in advancing the global transition towards renewable energy sources. Employing a systematic literature review and content analysis, the research scrutinizes sustainable finance mechanisms, the impact of Environmental, Social, and Governance (ESG) criteria on investment decisions, the significance of regulatory frameworks, and the strategic implications for stakeholders within the green energy ecosystem. The methodology encompasses a detailed examination of peer-reviewed articles, industry reports, and policy documents from 2013 to 2024, focusing on innovations, challenges, and opportunities in sustainable finance. The study identifies green bonds, loans, and investment funds as pivotal in mobilizing capital for green energy projects, yet highlights existing barriers such as regulatory uncertainties and the need for standardized ESG criteria. Key findings reveal that while sustainable finance is crucial for environmental sustainability and economic development, its effectiveness is contingent upon robust regulatory support and clear standards. Moreover, the research underscores the importance of stakeholder collaboration and innovative financial products in overcoming challenges and enhancing green energy adoption. The study emphasizes the critical need for advancing sustainable finance mechanisms, enhancing regulatory frameworks, and fostering stakeholder collaboration to facilitate a successful transition to green energy. It contributes valuable insights into sustainable finance's evolving landscape, offering guidance for policymakers, investors, and industry practitioners aiming to achieve long-term sustainability goals. Keywords: Sustainable Finance Mechanisms, Green Energy Transition, Environmental, Social, Governance (ESG) Criteria, Regulatory Frameworks.

Exploring sustainable finance mechanisms for green energy transition: A comprehensive review and analysis

This study elucidate the role of sustainable finance in advancing the global transition towards renewable energy sources. Employing a systematic literature review and content analysis, the research scrutinizes sustainable finance mechanisms, the impact of Environmental, Social, and Governance (ESG) criteria on investment decisions, the significance of regulatory frameworks, and the strategic implications for stakeholders within the green energy ecosystem. The methodology encompasses a detailed examination of peer-reviewed articles, industry reports, and policy documents from 2013 to 2024, focusing on innovations, challenges, and opportunities in sustainable finance. The study identifies green bonds, loans, and investment funds as pivotal in mobilizing capital for green energy projects, yet highlights existing barriers such as regulatory uncertainties and the need for standardized ESG criteria. Key findings reveal that while sustainable finance is crucial for environmental sustainability and economic development, its effectiveness is contingent upon robust regulatory support and clear standards. Moreover, the research underscores the importance of stakeholder collaboration and innovative financial products in overcoming challenges and enhancing green energy adoption. The study emphasizes the critical need for advancing sustainable finance mechanisms, enhancing regulatory frameworks, and fostering stakeholder collaboration to facilitate a successful transition to green energy. It contributes valuable insights into sustainable finance's evolving landscape, offering guidance for policymakers, investors, and industry practitioners aiming to achieve long-term sustainability goals. Keywords: Sustainable Finance Mechanisms, Green Energy Transition, Environmental, Social, Governance (ESG) Criteria, Regulatory Frameworks.

Examining time–frequency quantile dependence between green bond and green equity markets

In the context of the rapidly growing demand for green investments and the need to combat climate change, this study contributes to the emerging literature on green investments by exploring the time–frequency connectedness between green bonds (GBs) and green equities. Specifically, we examine the degree of connection between GBs and green equities, the extent to which these markets influence each other, and which one is the primary net transmitter versus the net receiver of shocks under diverse market conditions. To accomplish these objectives, we use the wavelet-based Quantile-on-Quantile (QQ), dynamic conditional correlation (DCC), portfolio implications, and Quantile VAR approaches. The results show that GBs and green equities have a strong positive connection, depending on time and frequency domains. However, a negative association between GBs and green equities is observed during periods of crisis, highlighting GBs’ ability to hedge green equity portfolios. The portfolio strategies demonstrate that investors require to invest in the Green Economy equity and S&P GB portfolio to reach the highest level of hedging effectiveness. The findings further imply that the Global Water Equity Index transmits the highest spillover to other green assets, while the Green Economy Equity Index receives the most spillover from other assets. The pairwise volatility connectivity reveals that most pairs have minimal quantile dependence, indicating the potential for diversification across the GB and green equity pairs. These findings have significant implications for investors and policymakers concerned with green investments and climate change mitigation.

How do green bonds promote common prosperity? Evidence from Chinese prefecture-level cities

PurposeThe purpose of this study is to examine the impact of green bonds on common prosperity in China. Green bonds have gained significant attention as a means to address financial challenges and promote environmental protection. This research aims to investigate the influence of green bonds on common prosperity by utilizing the system-generalized method of moments (SYS-GMM) and analyzing panel data from prefecture-level cities. The study also explores the theoretical mechanisms and heterogeneous relationships between green bonds and common prosperity, providing valuable guidance for advancing economic and social well-being in China.Design/methodology/approachThis study employs a system-generalized method of moments (SYS-GMM) as the methodology to investigate the influence of green bonds on common prosperity in China. Panel data from prefecture-level cities for the period 2014 to 2020 are utilized for analysis. The SYS-GMM approach allows for the examination of dynamic relationships and control of endogeneity issues. By utilizing this methodology, the study aims to provide robust and reliable findings on the impact of green bonds on common prosperity, considering the specific context of China's ecological civilization development and financial challenges faced by energy-saving and environmental protection enterprises.FindingsThe findings of this research indicate several important outcomes. Firstly, common prosperity in China experienced substantial growth between 2014 and 2020. Secondly, green bonds have demonstrated a clear and positive impact on common prosperity. They contribute to the enhancement of common prosperity by driving industrial structure upgrading and fostering green technology innovation. Lastly, the study reveals that the positive influence of green bonds on common prosperity is particularly pronounced in the western region of China. These findings highlight the significance of green bonds in promoting sustainable economic development and societal well-being.Originality/valueThis study contributes to the existing literature by examining the impact of green bonds on common prosperity in China, utilizing the system-generalized method of moments (SYS-GMM) and panel data analysis. The research not only adds to the understanding of the relationship between green bonds and economic well-being but also provides insights into the theoretical mechanisms and heterogeneous relationships involved. The findings showcase the positive influence of green bonds on common prosperity, emphasizing their role in addressing financial challenges, promoting environmental protection, and driving sustainable development. The study's conclusions offer valuable guidance for policymakers, financial institutions, and stakeholders in advancing common prosperity in China.

Effects of the utilization of green bonds proceeds on green bond premium

The measurement of premium remains a major challenge in the literature. This study explores the effects of green bond usage on green bond premium using green bonds data extracted from Bloomberg MSCI green bond index between 2007 and 2022. The study leverages fixed effects and pooled regression models to examine whether the green bond premium varies systematically with the issuer's specified use of the green bond's proceeds. The empirical results provide evidence of a positive association between the use of proceeds of green bonds and the premium on green bonds. The green premium of an average of 1–5 basis points across government and corporate issuers is observed. Our findings not only establish the influence of green bond usage on green premium, but also provides further evidence of how issuers can achieve borrowing cost advantage if the proceeds are targeted at environmentally friendly projects that align with investor preferences.

Green Bonds as A New Investment Tool For Sustainable Development In India

The present paper conceptualizes the meaning, need and importance of green bonds as an initiative towards investment tool and sustainable development in India. A green bond is a type of investment that provides financial support for particular projects related to sustainability issue of climate change and control. Indian Companies have incorporated investment in green bonds as a part of climate finance strategy. The ICMA issued principles of green bonds investment and voluntary process guidelines for issuing green bonds in 2021. The four principles are: use of proceeds, process for project evaluation and selection, management of proceeds and reporting. The SEBI has issued several rules for green bonds securities in India including disclosure requirements, monitoring and third-party review. The private bank of India i.e. Yes bank was the first issuer of green bonds in India in the year 2015. Indian green bond issuance has grasped a total of $21 billion as on February 2023. The scenario of green bond market in India for the year 2021 shows that the Utilities sector has more share of green bonds followed by corporates, Renewable Energy sector and Financials. The least share is with local government in India.