Data-Driven Green Bond Ratings: A Market Catalyst

26 Pages Posted: 29 Aug 2017 Last revised: 30 Aug 2017

See all articles by Patrick Reed

Patrick Reed

Independent

Todd Cort

Yale School of Management

Logan Yonavjak

Independent

Date Written: August 10, 2017

Abstract

The authors diagnose the problems with the current green bonds market, and propose a solution: data-driven environmental performance ratings. Green bonds should be understood as an eco-label for a credence good. The current lack of a premium for green labeled bonds is due to a lack of investor confidence ('credence') in the environmental attributes of bonds. To solve this dilemma, the market should shift its mindset from verifying the type of bond to assessing the environmental performance of the bond. The authors provide a framework to help investors or rating agencies do so feasibly.

Keywords: green bonds, sustainable finance, environmental finance, bonds

JEL Classification: G12, G14, G23, Q50, Q51, Q54

Suggested Citation

Reed, Patrick and Cort, Todd and Yonavjak, Logan, Data-Driven Green Bond Ratings: A Market Catalyst (August 10, 2017). Journal of Investing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3027045

Patrick Reed (Contact Author)

Independent ( email )

No Address Available

Todd Cort

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Logan Yonavjak

Independent ( email )

No Address Available

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