Green Bonds: Effectiveness and Implications for Public Policy

47 Pages Posted: 17 Jun 2019

Date Written: June 2019


This paper studies green bonds, a relatively new instrument in sustainable finance. I first describe the market for green bonds and characterize the “green bond boom” witnessed in recent years. Second, using firm-level data on green bonds issued by public companies, I examine companies’ financial and environmental performance following the issuance of green bonds. I find that the stock market responds positively to the announcement of green bond issues. Moreover, I document a significant increase in environmental performance, suggesting that green bonds are effective in improving companies’ environmental footprint. These findings are only significant for green bonds that are certified by independent third parties, suggesting that certification is an important governance mechanism in the green bond market. I conclude by discussing potential implications for public policy.

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Suggested Citation

Flammer, Caroline, Green Bonds: Effectiveness and Implications for Public Policy (June 2019). NBER Working Paper No. w25950. Available at SSRN:

Caroline Flammer (Contact Author)

Boston University ( email )

Boston University Questrom School of Business
595 Commonwealth Avenue, Office 634A
Boston, MA 02215
United States


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