A genuine commitment or a greenwashing trap: Investigating sustainability-linked bonds from a shareholder perspective
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School of Business |
Master's thesis
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Date
2024
Department
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Mcode
Degree programme
Finance
Language
en
Pages
93
Series
Abstract
This thesis investigates how sustainability-linked bonds (SLBs) are perceived by industry participants and the alignment of shareholder views with issuer motives. Using an event study on a sample of 318 SLBs issued by global firms between 2019- 2023, the results show a positive but insignificant stock market reaction following SLB announcements. First-time issuances, SLBs issued outside of Europe as well as by firms from industries which are not specifically recognised as carbon intensive receive higher cumulative abnormal returns while showing a trend of statistical significance. This suggests that investors perceive the sustainability commitment signal sent by firms to be generally positive, with the effect driven by certain subgroups. A difference-in-difference analysis using a matched sample of conventional bond issuers, however, shows that the environmental and social performance decreases following SLB issuances, suggesting that investor views and issuer motives are not aligned. Instead of improving their overall ESG performance, issuers appear to focus solely on the sustainability performance targets set in their SLBs, as despite the overall reduction in ESG performance, emission intensity is still reduced. A similar difference-in-difference analysis also shows that, contrary to green bonds, SLB issues are not able to significantly increase, nor decrease, institutional ownership in the underlying stock, suggesting that the signal is not strong enough to attract interest from a wider investor base.Description
Thesis advisor
Kaustia, MarkkuKeywords
ESG, sustainability-linked bonds, sustainable bonds, ESG performance, institutional ownership