Green Bonds as a Tool Against Climate Change?

23 Pages Posted: 2 Dec 2020

See all articles by Serena Fatica

Serena Fatica

European Commission - Joint Research Centre

Roberto Panzica

Joint Research Center of the European Commission

Date Written: October 1, 2020

Abstract

While green bonds are becoming increasingly popular in the corporate finance practice, little is known about their implications and effectiveness in terms of issuers’ environmental engagement. Using matched bond-issuer data, we test whether green bond issues are associated to a reduction in total and direct (scope 1) emissions of non-financial companies. We find that, compared to conventional bond issuers with similar financial characteristics and environmental ratings, green issuers display a decrease in the carbon intensity of their assets after borrowing on the green segment. The decrease in emissions is more pronounced, significant and long-lasting when we exclude green bonds with refinancing purposes, which is consistent with an increase in the volume of climate friendly activities due to new projects. We also find a larger reduction in emissions in case of green bonds that have external review, as well as those issued after the Paris Agreement.

Keywords: climate change; green bonds; impact investing; corporate sustainability; environment

JEL Classification: G12, Q50,Q51

Suggested Citation

Fatica, Serena and Panzica, Roberto, Green Bonds as a Tool Against Climate Change? (October 1, 2020). Available at SSRN: https://ssrn.com/abstract=3710020 or http://dx.doi.org/10.2139/ssrn.3710020

Serena Fatica

European Commission - Joint Research Centre ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

Roberto Panzica (Contact Author)

Joint Research Center of the European Commission ( email )

Via E. Fermi 2749
Ispra (VA), I-21027
Italy
93100 (Fax)

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