Green Bonds and Carbon Emissions: Exploring the Case for a Rating System at the Firm Level

BIS Quarterly Review, September 2020

17 Pages Posted: 22 Feb 2021

See all articles by Torsten Ehlers

Torsten Ehlers

Bank for International Settlements (BIS)

Benoît Mojon

Bank for International Settlements (BIS)

Frank Packer

Bank for International Settlements (BIS)

Date Written: September 14, 2020

Abstract

Green bonds are debt instruments whose proceeds finance projects with various environmental benefits - including climate change mitigation. So far, however, green bond projects have not necessarily translated into comparatively low or falling carbon emissions at the firm level. We discuss the potential benefits of a firm-level rating based on carbon intensity (emissions relative to revenue) to complement existing project-based green labels. We argue that such a rating system could provide a useful signal to investors and encourage firms to reduce their carbon footprint.

Keywords: green bonds, carbon emissions, green finance, climate transition, green ratings

JEL Classification: Q53, G18, G24

Suggested Citation

Ehlers, Torsten and Mojon, Benoît and Packer, Frank, Green Bonds and Carbon Emissions: Exploring the Case for a Rating System at the Firm Level (September 14, 2020). BIS Quarterly Review, September 2020, Available at SSRN: https://ssrn.com/abstract=3748440

Torsten Ehlers (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Benoît Mojon

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Frank Packer

Bank for International Settlements (BIS) ( email )

CH-4002 Basel, Basel-Stadt
Switzerland
4161 280 8449 (Phone)

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