Mobilizing private finance for renewable energy and energy efficiency is critical for Association of South-East Asian Nations (ASEAN) not only for the reduction of global temperature rise but also ...for meeting fast-growing energy demand. Two-thirds of green bonds issued in ASEAN were used to finance renewable energy and energy efficiency projects. This paper provides a review of green bond issuance and green bond policies in ASEAN. Issuance of green bonds in top three green bond issuing countries in ASEAN, i.e. Indonesia, Malaysia and Singapore, are reviewed in detail. Green bond policies in ASEAN are effective in promoting green bond issuance. However, this does not mean that green bond policies are effective in promoting renewable energy and energy efficiency projects in ASEAN. Proceedings of green bonds issued in ASEAN can be used for financing projects abroad or re-financing past loans, thus do not necessarily promote green investments in ASEAN.
The first objective of this paper is to study the existence of greenness in green bonds. For this objective, we propose a new model of price correlations between green bonds and energy commodities. ...The second objective is to examine the performance of green bonds over conventional bonds. We propose a new model of the expected return, the risk, and the performance ratio of green bond premiums defined by the log price differences between green and conventional bonds so as to address the second objective. Empirical studies using the data of green and conventional bond indices and crude oil prices show that the Bloomberg Barclays MSCI and the S&P green bond indices tend to have positive correlations with and increase in line with both WTI and Brent crude oil prices while the Solactive green bond index tends to have negative correlations with and decrease in line with both WTI and Brent crude oil prices. From the empirical evidence of the positive relationship between energy and environmental value, it is suggested that the greenness is incorporated in the Bloomberg Barclays MSCI and the S&P green bond. In contrast taking it into account that the conventional S&P bond index has negative correlations with WTI and Brent crude oil prices which are the same as the results of the Solactive green bond index, the Solactive green bond index may not fully represent the characteristics of green bonds in the sense of environmental value. We also demonstrate that the expected returns of green bond premiums are positive while decreasing and that the risks of green bond premiums are slightly decreasing but almost flat over time in the recent years, resulting in positive but decreasing information ratios. It implies that green bond investment performance is superior to conventional bond investment performance but the superiority is decaying over time.
•We examine the greenness and performance of green bonds in relation to energy.•We propose a new model of price correlations between green bonds and energies.•We propose a new model of the return, risk and performance of green bond premiums.•Empirical studies show that MSCI and S&P green bonds possess the greenness.•Green bonds outperform conventional bonds but the superiority is decaying over time.
This paper uses the bootstrap rolling-window Granger causality test to investigate the relationship between U.S. monetary policy uncertainty and green bond. The method addresses the limitations of ...ignoring the instability of coefficients and the time-varying relationship between the variables in previous literature. The results find both insignificant and significant relationship in the full period. One explanation of the insignificant relationship is that the changes of investor sentiment influence their judgment regarding to the monetary policy uncertainty and green bond, and thus the significance of the relationship between the variables. Besides, this paper finds the significant inter-relationship is time-varying. Specifically, in the sub-period when the market sentiment is low, the rising monetary policy uncertainty influences green bond price negatively. Meanwhile, the unexpected changes of green bond may also have both positive and negative effects on monetary policy uncertainty in different sub-periods. Thus, this paper proposes that the impact mechanism between the variables is effective when the investors are irrational. Furthermore, the findings may provide valuable implications for investors and governments, including adjusting investment strategy when the monetary policy is unclear, increasing monetary policy transparency, and monitoring speculative activity in green bond market. In addition, it is necessary to emphasize that the validity of the findings is limited to the U.S. and the period when investors’ sentiment experience large fluctuations. Finally, future research may consider expand the analysis to the green stock, as it is another important channel for renewable energy investment.
•The inter-relationships between monetary policy uncertainty and prices of green bonds are examined.•The rolling-window Granger causality method is applied.•The results find both insignificant and significant relationship.•The rising monetary policy uncertainty may influence green bond prices negatively.•The green bond may have a time-varying impact on monetary policy uncertainty.
This paper investigates the potential effects of the disclosure and the readability of a green bond’s issuance documentation on its liquidity. Using a sample of 274 green bonds issued by both ...corporate and financial issuers (102 unique firms) worldwide (23 countries) from 2011 to 2018, we show that both the disclosure of green bond frameworks and annual reports and their readability increase the bond’s liquidity. Our results are robust to checks for endogeneity and to alternative estimation techniques. Both disclosure and readability have a more important impact on liquidity for bonds issued by nonfinancial (vs. financial) issuers, bonds with longer maturities, and those with lower credit ratings.
In this study, we propose a novel quantile frequency connectedness approach that enables the investigation of propagation mechanisms by virtue of quantile and frequency. This approach allows for the ...analysis of connectedness measures considering either different frequencies for a given quantile or different quantiles for a given frequency. We investigate dynamic integration and return transmission among a set of four well-established environmental financial indices, namely the S&P Green Bond Index, MSCI Global Environment, Dow Jones Sustainability Index World, and S&P Global Clean Energy over the period from November 28th, 2008 to January 12th, 2022. S&P Green Bond Index and S&P Global Clean Energy appear to be both short-term and long-term net receivers of shocks while MSCI Global Environment and Dow Jones Sustainability Index World are both short-term and long-term transmitters of shocks. We also find that total connectedness indices (TCIs) are heterogeneous over time and economic event dependent. Furthermore, while the time-domain TCI is rather symmetric across quantiles, this is not the case for either the short-run or the long-run TCI.
Carbon emission is one of the major problems in emissions generating companies (EGCs) due resource consumption, spurring a need for carbon emission reduction, but most EGCs cannot reduce it due to a ...lack of green technology implementation. This research proposes a monopoly market under the consideration of EGCs and develops a simulation-based optimization model to measure the optimal behavior of green technology investment to reduce carbon emission. To see its implementation, we investigate the intervention of the government, which provides an optimal subsidy on green technology investment. Our study helps the government to find an optimal green technology investment and subsidy on green technology investment. Additionally, this optimal subsidy allows decision-makers to improve environment cleanliness by taking incentives in the form of green subsidy. They can also fulfill their primary objective of profit maximization by finding an optimum product price.
•The optimal behavior of green technology investment has been investigated in EGCs.•The study was analyzed by using discrete event simulation modeling and optimization under a monopoly market.•Subsidy policies from the government have been extracted to maximize the profit of EGCs and to keep the environment clean.•Optimal behavior of green technology investment subsidy was found to maximize profit under GTI.
•Impact of investor attention on green bond market performance.•Generalized forecast error decompositions are estimated to capture spillovers between investor attention and green bond ...market.•Time-varying impact of investor attention on green bond returns and volatility.•Feedback effect between the green bond market performance and investor attention.
This paper is the first empirical study of the link between investor attention and the green bond market performance. Using daily data of investor attention and green bond indexes, we find that investor attention can influence green bond returns and volatility, however, this relationship is time varying. Our results are relevant for investors as they shed light into the newly developed and fast growing green bond market. Our findings also emphasize the importance of appropriate information and attention for directing financial flows towards sustainable investment.
In recent years, the need to create new financial tools to mobilize private capital and generate suitable resources to face both social and environmental challenges led to the development of new ...tools and ideas. In this context, green bonds have emerged as a new financial tool to better respond to sustainability themes. This study is the first attempt to explore in depth the determinants of green bond performance. We focused on three perspectives: the specific characteristics of projects financed through a green bond, the broader firm‐specific corporate sustainability‐oriented strategy of the firm, and a country‐level perspective analyzing the country‐specific determinants of green bond performance. To test the hypotheses a sample of 306 corporate green bonds issued by 85 companies and referring to 1,788 green projects between 2013 and 2016, were retrieved from the Bloomberg database. The results provide interesting theoretical and practical implications for green bond issuers as well as investors and governments interested in green bonds.
With the growth of green bonds as an asset class, the certification of the actual climate footprint of projects financed with these bonds is gaining momentum among investors and policymakers. We ...investigate the informative content of Second Party Opinions (SPOs) issued by external reviewers to assess the quality of green bonds collecting a global sample of over 1200 corporate green bonds and matching results for 336 of those. We show that the market assigns a premium to the bonds with the best SPOs' valuation - namely, the “dark-” and “medium-” green bonds. However, in presence of a formal credit rating, the external reviews do not appear to incorporate distinctive information priced by the market. Using a difference-in-difference approach, we find that stricter green investment regulations like the adoption of the “EU Taxonomy” produce a “fly-to-quality” effect that widens the spread between dark and lighter green bonds' returns. Responsible investors do appear to rely on the judgement of external reviewers when a formal credit rating is absent, and they have significantly higher stakes in the greener bonds. Overall, our results indicate that external reviews can reduce the information asymmetry between issuers and investors when a credit rating is lacking, but they are not informative for rated green bonds.
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