The Demand for Green Bonds
68 Pages Posted: 22 Apr 2023
Date Written: April 1, 2023
Abstract
Drawing on signaling theory and socially responsible investment principles, we investigate whether the demand for corporate green bonds (GB) relative to similar non-green bonds (non-GB) is higher in the primary market. Leveraging unique information on the orderbook size of corporate bonds issued globally from 2013 to 2022, we find that, on average, the demand for GB is about 42 to 55% higher than comparable non-GB. Furthermore, we identify critical drivers of GB's demand: higher environmental, social, and governance (ESG) performance, lower ESG risk, and higher investments in green innovations are associated with higher demands for GB.
Keywords: JEL classifications: G14, G18, G32, M14, Q56 Green Bond Demand, Signaling Theory, Socially Responsible Investment Principles, ESG Performance, ESG Risk, Green Innovations
JEL Classification: G14, G18, G32, M14, Q56
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