Drivers of green bond market growth: The importance of Nationally Determined Contributions to the Paris Agreement and implications for sustainability
By Clarence Tolliver, A. Keeley, Shunsuke Managi. 2020
262 citations recorded by the source corpus.
Abstract Green bonds are increasingly being applied to finance emissions reductions, sustainable development, and other cleaner production investments conducive to reaching the 2 °C temperature target of the Paris Agreement. As their markets are relatively nascent, there is a gap in the empirical literature on the drivers of green bond market growth. To assess the impact that capital market growth drivers and Nationally Determined Contributions to the Paris Agreement have on green bond issuance volumes as indicators of market growth, this study employed a structural equation model using a panel dataset of over $300 billion in green bonds issued in 49 countries between 2007 and 2017. This is the first econometric study to demonstrate unique drivers of green bond market growth in addition to factors that similarly affect conventional bond market growth. This is also the first study to construct a normalized index of Nationally Determined Contributions robustness scores to measure their impacts on green bond market growth. Macroeconomic latent factors exerted three times the total influence exerted by institutional latent factors. Institutional effects are positive and indirect, while OECD membership impacts were small and statistically insignificant. Nationally Determined Contributions scores exerted the largest positive and statistically significant impacts among observed variables. These results suggest that Nationally Determined Contributions and other macroeconomic and institutional factors are driving growing green bond issuances that will finance climate and sustainability investments through the future. They also highlight the need for broader examinations of the determinants of green bond issuances as investment vehicles for sustainable outcomes.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/72ebece688c7e980a63ad87d4fc2867364481be5
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Citations in the corpus
- What Future for the Green Bond Market? How Can Policymakers, Companies, and Investors Unlock the Potential of the Green Bond Market? (2020, unknown): “The academic literature has focused on the macroeconomic conditions affecting the green bond market (Cochu et al. 2016; Jun et al. 2016) and its growth determinants, highlighting in particular the link between national development contributions and green bond issuance volumes (Tolliver et al. 2020).”
- Green Innovation and Finance in Asia (2020, unknown): “…investments in sustainability-enhancing renewable energy infrastructures (Tolliver et al., 2020a), various macroeconomic, institutional, and other factors will all affect the capacity of each country to expand green bond issuances (Tolliver et al., 2020b) as sustainability investment vehicles.”
- A review of studies on green finance of banks, research gaps and future directions (2021, background): “A typical example is the first green bond issued in North America to finance Public-Private Partnership (PPP) hospital project in Canada (Thomas 2014).”
- Why do institutional investors buy green bonds: Evidence from a survey of European asset managers (2021, unknown): “(2016), OECD (2017) and Tolliver et al. (2020).(5) For instance, Tolliver et al. (2020), using structural equation modelling to examine the drivers of green bond growth in different countries, document a link between green bond issuances and a country’s nationally determined contributions to the Par”