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Greening the Financial Sector: Evidence from Bank Green Bonds
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- Published: 07 December 2022
- Volume 188 , pages 259–279, ( 2023 )
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- Mascia Bedendo ORCID: orcid.org/0000-0003-0611-0860 1 ,
- Giacomo Nocera 2 &
- Linus Siming 3
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Turn green or lose ‘licence to operate’—Deutsche Bank CEO Christian Sewing (Olaf Storbeck, “Turn green or lose ‘licence to operate’, says Deutsche Bank chief,” Financial Times , May 20, 2021).
Banks are expected to play a key role in assisting the real economy with the green transition process. One of the tools used for this purpose is the issuance of green bonds. We analyze the characteristics of banks that issue green bonds to understand: (i) which banks are more likely to resort to these funding instruments, and (ii) if the issuance of green bonds leads to an improvement in a bank’s environmental footprint. We find that large banks and banks that had already publicly expressed their support for a green transition are more likely to issue green bonds. Conditional on being a green bond issuer, smaller banks tend to resort to green bonds in a more persistent manner and for relatively larger amounts, while larger banks issue green bonds on a more occasional basis and for smaller amounts. This heterogeneity is also reflected in our findings that only banks that issue green bonds more intensively improve their emissions and reduce lending to polluting sectors, thus contributing to the decarbonization of the financial sector.
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Green bonds as an instrument to finance low carbon transition
Eftichios S. Sartzetakis
Utilising Green Finance for Sustainability: Empirical Analysis of the Characteristics of Green Bond Markets
Green bonds issuance: insights in low- and middle-income countries
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Authors’ calculations based on Bloomberg data.
The banking sector accounted for 43% of all corporate bonds issued globally in 2020. Authors’ calculations based on Bloomberg data.
The number of green bond issuers reported in Table 3 (120) is smaller than the one reported in Table 2 (177), since Table 3 only refers to banks that have financial data available at year-end 2012, while Table 2 includes all green bond issuers that have financial data available at any point during the sample period.
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Acknowledgements
We are grateful to the editor, two anonymous reviewers, Özlem Dursun-de Neef and seminar participants at the University of Zurich, WHU Otto Beisheim School of Management, the Free University of Bozen-Bolzano, and conference attendants at the CGRM Conference in Rome, the FEBS Conference in Portsmouth, and the FMA European Conference in Lyon, for their helpful comments and useful suggestions. We thank Letizia Ricchiardi for excellent research assistance.
This study is funded by a CRC2021 Sustainability Grant from the Free University of Bozen-Bolzano.
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Department of Management, University of Bologna, Via Capo di Lucca 34, 40126, Bologna, Italy
Mascia Bedendo
Department of Finance, Audencia Business School, 8 Route de la Jonelière, 44300, Nantes, France
Giacomo Nocera
Faculty of Economics and Management, Free University of Bozen-Bolzano, Universitätsplatz 1, 39100, Bozen, Italy
Linus Siming
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Appendix 1: Event study around green bond announcements
In this appendix we perform an event study to test the stock price reaction of green bond issuers around the announcement of the issuance of green bonds. Our sample covers all green bonds issued by publicly listed banks worldwide between January 1, 2013 and October 31, 2020. The announcement dates of green bond issuances as well as the issuers’ daily stock prices are retrieved from Bloomberg. We use a one-factor market model to estimate the “normal” relation between stock and market returns since previous literature has shown that short-horizon event studies are not sensitive to the benchmark specification (Kothari and Warner, 2007 ):
where \({R}_{it}\) is the daily return on the common share of bank i on day t and \({R}_{mt}\) is the daily return on the MSCI World total return index on the same day. In line with Tang and Zhang ( 2020 ), the market model is estimated from 300 calendar days to 50 calendar days prior to the event date \(t=0\) , which coincides with the announcement date. We derive daily abnormal stock returns \({AR}_{it}\) as the difference between raw returns and returns estimated from the market model:
As in Tang and Zhang (2020) and Flammer ( 2021 ), we then compute cumulative abnormal returns \({CAR}_{i}\) for bank i around each event date by aggregating \({AR}_{it}\) from 5 days before to 10 days after (5 days before to 5 days after) the announcement date. The table reports the average CARs computed across the two event windows separately for first-time issues and subsequent issues, with t -statistics in parenthesis. Consistently with the findings from previous studies on corporate green bonds in general, we document, also in banks: (i) a positive stock price response following the announcement of the first green bond issuance; (ii) no stock price response following the announcement of subsequent green bond issuances. This is in line with the signaling argument, as the market learns about the bank’s commitment to green lending with the first-time issue, while the information content of subsequent issues is likely to resemble that of conventional bond issues (see the discussion in Tang and Zhang, 2020 , and Flammer, 2021 ).
- ∗, ∗∗, and ∗∗∗ denotes significance at the 10, 5, and 1% level
Appendix 2: Variable definitions
Appendix 3: t -tests on treated and control samples.
- This table reports summary statistics and t -tests for difference in means for treated (green bond issuers) and control (non-green bond issuers) banks from a matched sample. The matching is based on bank characteristics of bond issuers at year-end before the first green bond was issued. All variables are described in Appendix 2.
- ∗, ∗∗, and ∗∗∗ denotes significance at the 10, 5, and 1% level, respectively.
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Bedendo, M., Nocera, G. & Siming, L. Greening the Financial Sector: Evidence from Bank Green Bonds. J Bus Ethics 188 , 259–279 (2023). https://doi.org/10.1007/s10551-022-05305-9
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Received : 01 May 2022
Accepted : 28 November 2022
Published : 07 December 2022
Issue Date : November 2023
DOI : https://doi.org/10.1007/s10551-022-05305-9
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Financial Management. Green Bonds – Success or Failure?
Hammer, Thomas and Siegfried, Patrick (2021): Financial Management. Green Bonds – Success or Failure? Published in: Expert Journal of Finance , Vol. 9, (31 December 2021): pp. 1-8.
This text will explain which role “Green Bonds” play in financing projects and how the green factor is weighted. It will be discussed on how the term “green” can change the price of the bond, if there is a “green premium” and for which group of investors this type of bond is interesting. We will discuss ways to reduce their cost of capital, also considering the risks and on ways on how to improve their conditions. The sustainable and eco-friendly aspects are also highlighted in this text and they might become crucial in future investing, which gives the bond an interesting role.
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MBA Master's Thesis The Emergence of Green Bonds as Innovative Financial Instruments: A Bibliometrics Analysis from 2008 to 2020 Munich Business School Working Paper 2021-04 Nicolas Penuela, MBA Email: [email protected] Munich Business School Working Paper Series, ISSN 2367-3869
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green bonds situated in the context of green finance as a vehicle for mobilizing capital to support renewable energy integration efforts. The research also examines the use of green bonds as a ... 1.6 Thesis Structure ..... 16 Chapter Two: Examining Existing Literature on Green Bonds: Using The Purposive Sample of Literature ...
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Issuing a green bond can thus help to consolidate internally the sustainability work the company is already doing. In a similar way, issuing a green bond is also viewed as a good means to communicate this work externally. Being able to issue a green bond is also perceived as a stamp of quality for the organisation.
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Bank bonds and corporate bonds. This figure compares the market share of green bonds (x-axis) and conventional bonds (y-axis) issued by banks (out of green and conventional bonds issued by banks and non-financial corporates) at country level.Sample period: January 2013-October 2020. Entries in blue (red) denote countries where the market share of bank green bonds is higher (lower) than that ...
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This master thesis is dedicated to all of them. To my supervisor, Professor Szabolcs, I would like to express my gratitude for the assistance, the advice and the patience to lead someone who at times found herself lost. Thank you for all the help. ... Green bonds appeared in financial markets as a way to materialize both issuers' and ...
Abstract. This text will explain which role "Green Bonds" play in financing projects and how the green factor is weighted. It will be discussed on how the term "green" can change the price of the bond, if there is a "green premium" and for which group of investors this type of bond is interesting. We will discuss ways to reduce ...
Green bond and green growth possibility. Green bond (GB) is the concept of World Bank primarily introduced in late 2010, raised to reverse high carbon emission and o mitigate the climate changes (Zhou and Cui, 2019).According to GB fundmentals, projects are keenly assessed and are financed through green bonds to commence green energy (Maltais and Nykvist, 2020), boost green energy intensity ...