Bond Returns Research Articles

Managing environmental finance in the digital era: Evidence from green bonds

Using recently available data on green finance from the International Monetary Fund, we analyze the impact of digital transformation on green bond issuance in forty-six countries during 1991–2021 within the context of environmental finance management. To measure digital transformation, we utilize the Digital Adoption Index provided by the World Bank and its subcomponents, aligning this analysis with broader environmental finance management strategies. Additionally, we control for the effect of various environmental, economic, and technological factors. Our results reveal a positive association between digital transformation and green bond issuance across these countries. Furthermore, our findings suggest that the effect of digital transformation on green bond issuance may not occur immediately and is characterized by a linear relationship. Our sensitivity testing and endogeneity analysis confirmed the reliability of our findings under different assumptions and model specifications. After decomposing the digital adoption index, our dominance analysis highlighted the key role of advancements in digital adoption by businesses, particularly, and the quality of capital services in the economy in driving the development of the green bond market. Further, stable political conditions, low enforcement costs, and fintech market growth mitigate enhance the digital transformation impact on green bonds. These results indicate potential directions for effective policy interventions.

Assessing the Role of Climate Transition Bonds in Advancing Green Transformations in Japan

This study investigates the potential of Climate Transition Bonds as strategic financial instruments in promoting green transformations within Japan’s carbon-intensive sectors. Through a qualitative case study approach, we assess four prominent bond issuances—Japan Government Bonds, MUFG Bonds, TEPCO Bonds, and SMBC Bonds—focusing on their contributions to emissions reduction, renewable energy expansion, and technological innovation. The analysis reveals that these bonds play a pivotal role in enabling Japan to advance its carbon neutrality goals by financing key decarbonization projects. However, significant challenges persist, including the limited scalability of emerging technologies, disparities in economic benefits across sectors, and governance inefficiencies that may hinder optimal outcomes. The findings underscore the necessity of refining collaborative governance frameworks to enhance transparency, stakeholder inclusivity and regulatory oversight in the deployment of these bonds. This paper contributes to the discourse on sustainable finance by elucidating the policy implications of climate transition bonds, proposing avenues for improved governance, and highlighting the structural adjustments required to align these financial mechanisms with Japan’s long-term sustainability objectives.

Issuance of urban investment bonds and high-quality urban economic development

High-quality economic development is a significant issue in China's new era, wherein an active government plays a crucial role in the rational allocation of public resources. This study examines the impact of urban investment bond issuance on the high-quality development of urban economies using panel data from Chinese cities. It further explores the specific mechanisms and regional heterogeneity of this impact. By clarifying the fundamental attributes and channels of influence of urban investment bonds, this study incorporates regional debt elements as a unique factor into the spatial Durbin model to investigate their specific spatial spillover effects, aiming to broaden and enrich economic growth theory. The findings reveal that urban investment bond issuance significantly promotes high-quality urban economic development and has a positive spatial spillover effect. The primary mechanisms include alleviating fiscal pressure, enhancing research and development expenditure, and increasing educational spending. Heterogeneity analysis indicates that the promotion effect of urban investment bonds on high-quality urban economic development is not significant in central and western cities. This study provides theoretical and practical insights into accurately understanding the relationship between government-issued urban investment bonds and high-quality economic development and aids different regions and cities in identifying their unique positions to implement tailored debt issuance strategies.

The United Nations Sustainable Development Goal 13 Climate Action and Efforts of UK Banks Toward a Low Carbon Economy?

Banks are increasingly motivated to align their business operations with the United Nations Sustainable Development Goals (SDGs) as this can help them attract investors and build a more loyal customer base in the long run. This paper explores whether major UK banks (HSBC Holdings Plc, Lloyds Banking Group Plc, Barclays Plc, Standard Chartered Plc, and NatWest Group Plc) are increasing their involvement in green banking by transitioning away from fossil fuels. The research gathered expert and policymaker views on decarbonization (reducing carbon footprint) at the Scotland Policy Conference UK in 2022 to support its findings. The results reveal slow progress toward a green banking regime, as the banks continued underwriting fossil fuel IPOs and bond issuances, and funding carbon-intensive industries. Their portfolios primarily consist of fossil fuel projects, with implications for insufficient effort toward meeting UN SDGs related to global climate commitments. The study proposes a policy recommendation: governments should introduce regulations requiring banks to develop a minimum percentage of financial products and services designed to support SDG-related activities, fostering a low-carbon economy.

Legal transplantation of blue bond regulation in Indonesia

As one of the largest archipelagic states in the world, Indonesia has a maritime economic potential of IDR 2026 trillion divided into coastal (IDR 650 trillion), biotechnology IDR (480 trillion), fisheries (IDR 380 trillion), petroleum (IDR 252 trillion), marine transportation (IDR 240 trillion), and marine tourism (IDR 24 trillion). However, it does not yet have a special and specific financing instrument oriented toward the development of its marine economy. The purpose of this study was to identify a blue bond regulatory model as an instrument for developing the blue economy in Indonesia. The study method employed is normative-exploratory legal research, which combines statutory, conceptual, and comparative approaches. Using several models of legal development, namely unification, harmonization, and transplantation, revealed the right model for regulating blue bonds in Indonesia. The results indicate that the development of legal arrangements in Indonesia, as stated in the National Long-Term Development Plan (RPJPN) 2025–2045 oriented towards realizing economic transformation to increase the productivity of the blue economy will be a future economic booster in line with its role as the world's maritime axis. Thus, legal transplantation of the Blue Economy Act and SEC Memorandum Circular No. 15, Series of 2023, Guidelines on Eligible Blue Projects and Activities for the Issuance of Blue Bonds in the Philippines is an effective step that can be taken in Indonesia.

Deconstructing the Yield Curve

Abstract We introduce a novel nonparametric bootstrap for the yield curve that is agnostic to the true factor structure of interest rates. We deconstruct the yield curve into primitive objects, with weak cross-sectional and time-series dependence, that serve as building blocks for resampling the data. We analyze the properties of the bootstrap for mimicking salient features of the data and conducting valid inference. We demonstrate the benefits of our general method by revisiting the predictability of bond returns based on slow-moving fundamentals. We find that trend inflation, but not the equilibrium real rate, has predictive power for future bond returns.

Restrictive bond covenants: Evidence from family firms in China

Researchers and regulatory authorities are paying growing attention to the protection of creditors' interests against potential infringement by major shareholders in the Chinese bond market. In particular, family firms have come under increased scrutiny given the typically large, concentrated ownership position of the controlling family members. While family firms have been well-examined in most Western countries, there is little research to date on family firms in China – a research gap that is concerning given the growing importance of China's debt markets on a global stage and the recent bankruptcy wave surrounding Chinese bond issues. This study aims to close this gap by examining the impact of family control on the number of restrictive covenants in corporate bond contracts issued by Chinese companies. Based on a sample of over 1100 bonds issued between 2009 and 2021, we find that corporate bonds issued by Chinese family firms contain a larger number of restrictive covenants than those issued by non-family firms – a result that is in contrast with previous findings for the United States. Furthermore, the impact of family control on the number of restrictive covenants is more pronounced in bonds issued by companies with higher social capital control, lower investment efficiency, and higher financing constraints. A mechanism analysis reveals that relative to non-family firms, the shareholders and managers of family companies are more prone to collusion and exhibit a higher degree of separation of rights; this increases the risk to creditors' financial interests and raises their requirement for restrictive covenants. Finally, we present evidence to suggest that improving the level of internal governance and external supervision of firms can help to reduce the impact of family control on the number of restrictive covenants.

Analysis of the Process of RMB Internationalization with Special Emphasis on the Offshore Bond Markets

With rapid economic growth in recent years, China has become the world's second largest economy. In the context of economic globalization, the process of RMB internationalization is gradually accelerating, and remarkable achievements have been made in cross-border settlement and offshore market. This paper first reviews the relevant theories of currency internationalization and analyzes the historical conditions of the development of RMB internationalization. It reveals the internal and external driving forces of RMB internationalization and sorts out its development context. Taking the offshore bond market as the research object, the currency structure in the international bond market is selected as an index reflecting the degree of currency internationalization, and the determining model of international bond proportion is established. Using the data of 28 countries from 2005 to 2019, the regression analysis shows that a country's economic size and domestic macroeconomic stability are positively correlated with the level of currency internationalization, while foreign exchange reserves are negatively correlated. According to the model, the difference between the theoretical demand and the actual issuance of RMB international bonds is nearly 10 times. Therefore, it can be inferred that the offshore RMB bond market has great development potential.

Ecological and economic effects of green financing

Currently, all three components of sustainable development at all levels are becoming increasingly important to ensure the existence and development of states. This article is devoted to green finance, linking economic and environmental aspects of development. Green financing is a policy direction to reduce negative environmental externalities and attract investment in new technologies, which has become widespread in recent years; green bonds are one of its most important instruments. To assess the impact of issuing green bonds on the environmental component, represented by the equivalent of carbon monoxide emissions, the article was the first to apply a matching procedure to evaluate company data obtained using the Refinitiv database. The authors showed a model specification that supports the hypothesis that the issuance of green bonds has an impact on reducing carbon monoxide equivalent emissions in the long term, but the results of the logarithmic specification of this model turned out to be unstable. From the calculations presented in the article it follows, that despite the fact that the effect of issuing green bonds does not have an immediate impact on the company’s environmental performance, but in the long run it can improve their performance. It helps to raise environmental rating of companies and, in turn, can help attract investments for the development of technologies and infrastructure that ensure technological independence, the use of promising energy sources, the best available technologies, and the transport greening.

Pd-Catalyzed Site-Selective Defluorinative Etherification Between Unactivated Perfluoroarenes and Hydrobenzoxazoles.

Polyfluoroaryl ethers represent an important framework of biologically active molecules and materials. Owing to the strong bond dissociation energy of C-F bond, selectivity and other issues, transition metal-catalyzed synthesis of polyfluoroaryl ethers from perfluoroarenes via the activation of C-F bond is challenging and underdeveloped, as compared to the well-documented C-O bond formation starting from aryl iodides, aryl bromides or aryl chlorides. Herein, an unprecedented Pd-catalyzed defluorinative etherification for the synthesis of polyfluoroaryl ether skeletons using hydrobenzoxazoles as phenol surrogate, has been reported. The substrate scope for this protocol is broad, with respect to hydrobenzoxazoles and perfluoroarenes, under mild reaction conditions. More importantly, challenging alkenyl and alkynyl substituted polyfluoroarenes could be successfully used as the cou-pling component for Pd-catalyzed etherification reaction. Density functional theory (DFT) calculations were employed to investigate the reaction mechanism, which suggested that oxidative addition between polyfluorobenzene and Pd(0) constituted the rate-determining step.

Building a European Union ‘Treasury’: Explaining the European Commission's New Approach to Debt Issuance and Management

AbstractThis article examines how the European Commission went from being an occasional participant in capital markets in the 1970s to an established bond issuer by the 2020s. As a result of these changes, the Commission has moved away from its traditional model of back‐to‐back lending using a wide array of funding instruments towards the regular issuance of EU bonds and bills in the style of a European treasury. Using a principal–agent approach, we ask whether this shift was driven by member states seeking to reap the benefits of collective borrowing or rather by slippage by the Commission aimed at spurring European integration. Our results show that the Commission's occasional attempts to advance wider political objectives were rebuffed by member states, which, nonetheless, ultimately embraced the idea of a European treasury. Our findings emphasise the logic of delegation over agency slack when it comes to the EU's evolution as a borrower.

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

This study examines the real effects of third-party certification on green bond issuance by Chinese listed firms over the period 2016–2022. Our findings reveal that the issuance of certified (non-certified) green bonds results in favourable (non-significant or even negative) stock market reactions in both the short and long term, indicating that third-party certification adds value for stock investors. In addition, we analyse the underlying mechanisms that drive the value creation of third-party certification in green bond issuance. We find that third-party certification effectively reduces information asymmetries between firms and investors, induces firms to genuinely prioritise sustainable practices and improves firms' environmental performance, leading to increases in investor demand and firm value. Our further analysis reveals that third-party certification helps green bond issuers attract long-term investors, increases analyst coverage and induces positive opinions from the regulator on firm disclosure. Overall, this study documents that third-party certification of green bond issuers can generate real economic and environmental benefits for issuers.

Strategic Approaches to Municipal Bond Management in West Java’s Debt Management Unit

The research on the "Debt Management Unit (DMU) Strategy in the Issuance of Municipal Bonds in West Java Province" addresses critical challenges local governments face in optimising financial resources for infrastructure development. This study is significant within the realm of Social Sciences, especially public policy, as it explores innovative financial strategies that could potentially reshape regional economic development. The background of this study stems from the suboptimal performance of the DMU in managing municipal bonds, a crucial tool for financing public infrastructure. The research aims to analyze the role of the DMU, identify key factors influencing its effectiveness, and propose strategic solutions to enhance its performance. Using a qualitative methodology, the study gathers data through interviews, observations, and document analysis, providing a comprehensive understanding of the DMU's operational challenges. The findings contribute both academically and practically by highlighting the importance of strategic management in public finance, particularly in a developing region like West Java. The proposed strategies, developed through SWOT analysis, offer actionable insights for policymakers to optimize debt management, thus ensuring sustainable infrastructure development. This research not only enriches the academic discourse on public financial management but also provides practical solutions for local governments facing similar challenges, making it a valuable contribution to both scholarly and applied fields.

Критерії відповідності фінансового менеджменту емітента зелених облігацій

Introduction. A fundamental principle in the green bond market is the financing of projects that have a positive impact on the environment. Socially responsible investors want to be sure that the proceeds from the issuance of these securities are used as intended, and that the projects being financed contribute to the achievement of environmental goals. For this purpose, the relevant international standards have already been adopted on the green bond market. Problem Statement. In the green bond market, manipulation often occurs when the proceeds from the issuance of these securities are allocated to projects that are not actually environmentally friendly, although they are portrayed as such. Compliance of the financial management of the issuer of green bonds with generally accepted standards is always in the focus of attention of socially responsible investors. An urgent task is to measure the compliance of financial management with generally accepted standards, which will affect the future results of the issuer of green bonds in the distribution of income to achieve environmental goals. Purpose of the article is to identify the criteria for compliance of the green bond issuer's financial management with internationally recognized standards. Methods. The following research methods were used: the generalization method (when studying theoretical sources, scientific works of famous scientists and researchers on selected issues); methods of comparisons and synthesis (during the review of international acts, existing practices and standards), the method of analysis (to identify the criteria of compliance of financial management in the green bond market); logical method (for forming conclusions). Results. The article reveals the concept and features of financial management in the green bond market, examines global practices and standards for managing proceeds from the issuance of these securities. The principles and requirements that issuers of green bonds on the global and European markets should follow are summarized. On the basis of the conducted research, the criteria of compliance of financial management in the market of green bonds are singled out. Conclusions. The principles and methods contained in international standards and recommended acts on the green bond market provide a basis for measuring the compliance of the issuer's financial management with internationally recognized practices. The conducted research made it possible to single out the following criteria: 1) the ability to properly select and evaluate projects; 2) confirmation of the targeted direction of income; 3) availability of separate accounting of receipts; 4) organization of control over revenue management; 5) involvement of an independent third party in the control. Identified financial management compliance criteria make it possible to identify the green bond issuer's strengths and weaknesses for further improvement of its internal practices, increase transparency, and improve management processes and foundations. Checking the issuer of green bonds according to each of the criteria on a point basis allows establishing the general level of compliance of its financial management with the expectations of socially responsible investors.

Analysis of Green Bond Yields in Different Economic Regimes: High and Low Interest Rates

Abstract In recent years, green bonds have emerged as a significant financial instrument, attracting considerable attention as a means of financing environmentally sustainable projects. This research aims to examine whether there is a statistically significant difference in the returns of green and conventional bonds in international markets under two different stages of the economic cycle, low and high interest rate regimes. The study was conducted based on the bond matching method, where bonds with identical characteristics are considered, except for one, whether or not the bond is green. The results of this study demonstrate the existence of a green premium in both economic regimes. Additionally, an increase in the green premium was identified in the regime of positive interest rates. Considering the observed differences in the green premium across different sectors, it seems that the theory of lower risk of green bonds best explains the reason for the greenium.

The Connections among the US, China and Russia through Safe Assets

Abstract This paper addresses the following problem: how debt chains sewed through government bonds are operated under either full commitment or limited commitment of the valuation of the debt by bond issuing countries. This paper takes the debt relationship of the US, China and Russia as an example to study the problem. This paper finds that even under the full commitment situation, the debt chain is hard to maintain in some circumstances. In the limited-commitment situation, even if safe asset issuance is a reflection of a country’s financial power, because China’s safe asset issued to Russia is denoted by USD, whether or not China encounters Triffin dilemma is ultimately determined by the US.

Russia–Ukraine war and the cost of borrowing in the West African Economic and Monetary Union sovereign debt market

AbstractThis paper contributes to the emerging literature on the economic impacts of the Russia–Ukraine war by estimating the effects of that war on FCFA‐denominated sovereign bond yields and spreads for the West African Economic and Monetary Union (WAEMU) countries. Using ordinary least squares regressions on monthly panel data from January 2020 to December 2022, we found three key results. First, the Russia–Ukraine war significantly increased long‐term government bonds but had no impact on short‐term sovereign bond yields. Second, the Russia–Ukraine war raised sovereign bond spreads in WAEMU countries. These results suggest that WAEMU countries may consider reducing sovereign long‐term bond issuances and exploiting alternative financing sources, such as concessional financing, until the war and its corollary of global economic and financial imbalances are resolved. Finally, we found that the Central Bank of West African States's policy rate hikes increase governments' borrowing costs. Given this impact, we recommend complementing monetary policy with nonmonetary and fiscal policy measures to ease inflationary pressure from the Russia–Ukraine war. This approach may help mitigate the upward pressure driven by monetary policy tightening on sovereign borrowing costs in the WAEMU government securities markets.

The Impact of Financial Innovation on Environmental Protection:Literature Review and Case Study

This study explores the relationship between financial innovation and environmental protection, focusing on how financial innovation can contribute to sustainable development and ecological conservation. Through a comprehensive literature review, this paper identifies various forms of financial innovation, including green finance, socially responsible investing, and impact investing. These have emerged as significant tools in promoting environmental sustainability. The literature suggests that financial innovation plays a crucial role in directing capital towards environmentally friendly projects and companies, thereby reducing the funding of polluting industries. The implementation of green bonds, green banks, and other financial instruments has been instrumental in channeling investments towards renewable energy, clean technology, and other eco-friendly initiatives. These financial mechanisms not only encourage corporate responsibility but also stimulate innovation in clean technologies by providing necessary funding and risk management solutions.The Case study is presented to exemplify the practical application of financial innovation in environmental protection. The case focuses on the development and impact of a green bond issuance by a major financial institution, highlighting the positive environmental outcomes achieved through the financing of specific sustainable projects. The analysis reveals that such financial products have led to measurable reductions in greenhouse gas emissions and improvements in resource efficiency. By synthesizing theoretical insights and empirical evidence, this research contributes to a deeper understanding of the nuanced interplay between finance and environmental preservation, suggesting that financial innovation can be a powerful ally in the global effort toward ecological conservation and sustainable development.

Do Green Bonds Issue Statistically Significant Effect on the Indebteness’ European Companies’ Performance?

Objectives: The objective of this paper is to analyze the impact of issuing Green Bonds on the financial performance of European energy companies. This paper analyses the indebtedness of 30 European companies in the energy sector and verifies if there is any relationship between the Green Bonds issue and companies’ value between 2015 and 2022. Theoretical Framework: Green Bonds have been increasing their visibility in the financing market, representing an innovative debt instrument, becoming a way of reducing the pressure of bank loans and the associated financial costs. Green Bonds present themselves as an important choice for economic agents, with a positive impact on the financial performance of financed projects expected. We therefore thought it would be interesting to analyze whether green bonds have a statistically significant effect on the debt performance of European energy companies. Method: For this purpose, the Bloomberg database was used, and a sample of bonds from Euronext ESG Bonds. A Pooled OLS and Random model were applied. The software chosen for analyzing the empirical model was R Studio. The Chi-Square independence test and Cramer's V were also applied. Results and Discussion: Results indicate that in the years in which energy companies issued Green Bonds they had a better performance, measured by the ROE indicator. The internal variables TTA, LTA, STA, EAF and GAF are statistically significant in the performance (ROE) of the Energy European Companies. The Chi-Square independence test and Cramer's V degree of association between the debt and DUMMY variable were also applied. The conclusion is that when Green Bonds are issued, indebtedness decreases. Issuing Green Bonds is a more sustainable alternative to traditional sources of finance. There is a lot of research in this area, and it is quite diverse. There are researchers interested in this topic on all continents. In this sense, given the difference in Green Bonds legislation and cultural aspects, it is not always straightforward to carry out a comparative analysis of the results obtained. Research Implications: Green finance has become an important subject for researchers and promotes sustainable economic development. The goal is financing green projects, contributing to mitigation and adaptation to climate changes. Represent a resent an innovative debt instrument. In other words, it is an important choice for economic agents. Originality/Value: It's the first study of the European Union's energy companies that emit Green Bonds. It should be noted that issuing Green Bonds is not only important for environmental and sustainability issues, but also means reducing bank loans, which have high financial costs. More sustainable forms of financing are important for growth and keeping up with the changes the world is going through. Companies must be aware of these new forms of financing as routine bank loans are not always the best way to meet companies' financial needs.

Does the impact of credit rating downgrade on bond returns vary by region: Empirical evidence from China

Utilizing trading data from corporate and enterprise bonds that experienced credit rating downgrades between 2012 and 2022, this study employs event study methodology and regression analysis to examine the regional differences in the impact of credit rating downgrades on bond pricing and the mechanisms behind these effects. The study found that, during the window period when the bond credit rating is downgraded, there is a significant difference in the cumulative abnormal return of bonds between the eastern and non-eastern regions. Heterogeneity analysis indicates that bonds with higher credit ratings and those issued by non-state-owned enterprises are more significantly affected by credit rating downgrades. This study provides empirical evidence of regional disparities in the impact of credit rating downgrades, and proposes a theoretical mechanism whereby differences in the degree of marketization influence these effects through varying expectations of government implicit guarantees. The findings offer a theoretical foundation for optimizing decision-making by participants in the Chinese bond market.