Greenwashing corporate green bonds: Evidence from European and North American markets
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Journal Title
Journal ISSN
Volume Title
School of Business |
Master's thesis
Authors
Date
2022
Department
Major/Subject
Mcode
Degree programme
Finance
Language
en
Pages
62
Series
Abstract
In this research, I study the underlying issuance motivations and environmental impact of a relatively new sustainable finance instrument, corporate green bonds. I particularly focus on greenwashing and signaling theories as rationales for issuance. I show that recent environmental controversies increase the likelihood of green bond issuance by 10%. I then show that corporate green bond issuers do not significantly enhance post-issuance environmental performance, even though issuances are positively associated with new post-issuance environmental investment initiatives and expenditures. Overall, I find my results consistent with greenwashing theory and inconsistent with signaling theory – by issuing green bonds, companies would not credibly signal their environmental commitment but may possibly mislead people to believe that they are doing more for the environment than they actually are. Additionally, I provide some evidence that the expected environmental impact is higher when a green bond’s use of proceeds is more precisely defined and vice versa with vaguely and broadly defined uses of proceeds. Finally, I find that corporate green bonds are expected to enhance corporate governance post-issuance, implying that they would mitigate debtholders’ risks although their environmental impact is considered insignificant, and misallocation of proceeds may occur.Description
Thesis advisor
Rantapuska, EliasKeywords
green bond, sustainable finance, greenwashing, impact investing, ESG