Green Bonds, Empty Promises

57 Pages Posted: 7 Feb 2023 Last revised: 12 Jan 2024

See all articles by Quinn Curtis

Quinn Curtis

University of Virginia School of Law

Mark C. Weidemaier

University of North Carolina School of Law

Mitu Gulati

University of Virginia School of Law

Date Written: February 6, 2023

Abstract

We examine the legal terms in the market for green bonds, debt instruments in which proceeds are earmarked, directly or indirectly, for projects with a positive environmental impact. Utilizing a sample of nearly 1000 bonds over the entire history of the market and supplementing this data with interviews with over 50 market participants and policymakers, we find a concerning lack of enforce ability of green promises. Moreover, these promises have been getting weaker over time. Green bonds often make vague commitments, exclude failures to live up to those commitments from default events, and disclaim an obligation to perform in other parts of the document. These shortcomings are known to market participants. Yet, demand for these instruments has been growing. We ask why green bond promises are so weak, while the same investors demand strong promises from the same issuers in other settings.

Keywords: Green bonds, ESG, capital markets, sovereign debt

Suggested Citation

Curtis, Quinn and Weidemaier, Mark C. and Gulati, Mitu, Green Bonds, Empty Promises (February 6, 2023). Virginia Public Law and Legal Theory Research Paper No. 2023-14, Virginia Law and Economics Research Paper No. 2023-05, UNC Legal Studies Research Paper No. 4350209, North Carolina Law Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4350209 or http://dx.doi.org/10.2139/ssrn.4350209

Quinn Curtis

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

HOME PAGE: http://https://www.law.virginia.edu/faculty/profile/qc3q/2298852

Mark C. Weidemaier (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States
919.843.4373 (Phone)

Mitu Gulati

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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