Data-Driven Green Bond Ratings: A Market Catalyst
Posted: 29 Aug 2017 Last revised: 4 Oct 2019
Date Written: August 10, 2017
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: Suggested Citation