Corporate Green Bonds

Abstract

This study examines corporate green bonds, a new practice in the corporate landscape. I document that the issuance of corporate green bonds has become more prevalent over time, particularly in industries where the natural environment is financially material. I further document that green bonds yield i) positive announcement returns and improvements in long-term value, ii) improvements in environmental performance (specifically, an increase in the company’s environmental rating, a decrease in emissions, and an increase in green patenting), and iii) an increase in ownership by long-term and green investors. Overall, these results indicate that green bonds are effective — companies invest the proceeds in projects that improve the company’s environmental footprint and contribute to long-term value creation — and help attract an investor clientele that is sensitive to the environment.

Keywords: corporate green bonds, impact investing, corporate sustainability, sustainable finance, climate change, longterm orientation

JEL Classification: G23, M14, D22, Q2, G14