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  • 2021
  • Working Paper

The Green Bonding Hypothesis: How Do Green Bonds Enhance the Credibility of Environmental Commitments?

By: Shirley Lu
  • Format:Print
  • | Language:English
  • | Pages:78
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Abstract

This paper proposes and provides evidence on a green bonding hypothesis, where green bonds act as a commitment device that subjects firms to institutions holding them accountable to their environmental promises. I find that green-bond issuers face higher climate change risks and opportunities but fewer financial constraints than do traditional-bond issuers. Moreover, consistent with green bonds acting as a commitment device, green-bond issuers increase emissions-target achievements and face more media scrutiny when their target progress decreases after issuing green bonds. In additional analyses, I find that when a municipality issues green bonds, the issuer experiences a reduction in financing costs for both traditional and green bonds issued on the same day, consistent with green bonds being an environmental commitment for an entity, rather than a security-level commitment.

Keywords

Bonding Hypothesis; Sustainable Finance; Climate Change; Corporate Social Responsibility and Impact; Environmental Sustainability; Bonds; Corporate Accountability

Citation

Lu, Shirley. "The Green Bonding Hypothesis: How Do Green Bonds Enhance the Credibility of Environmental Commitments?" SSRN Working Paper Series, No. 3898909, December 2021.
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About The Author

Shirley Lu

Accounting and Management
→More Publications

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    Catalysts for Climate Solutions: Corporate Responses to Venture Capital Financing of Climate-tech Startups

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More from the Author
  • Limited Accountability and Awareness of Corporate Emissions Target Outcomes By: Xiaoyan Jiang, Shawn Kim and Shirley Lu
  • Climate Solutions, Transition Risk, and Stock Returns By: Shirley Lu, Edward J. Riedl, Simon Xu and George Serafeim
  • Catalysts for Climate Solutions: Corporate Responses to Venture Capital Financing of Climate-tech Startups By: Shirley Lu, George Serafeim and Simon Xu
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