Financing environmentally-sustainable projects with green bonds

Abstract

A structural model for green bonds is developed to explain the formation and dynamics of green bond prices and to address the issue of the so-called ‘greenium’, that is, the difference between the yields on a conventional bond and a green bond with the same characteristics. We provide answers to the following questions: What are the determinants of the green bond value? Do green bonds enhance the credit quality of the issuer? Are green bonds a relatively cheap tool to fund sustainable investments? We also study the effect of investors' environmental concern on portfolio allocation. Our results have direct policy implications and suggest that an improvement in credit quality could ultimately lead to a lower cost of capital for green bond issuers and that governmental tax-based incentives and an increase in investors' green awareness play a significant role in scaling up the green bonds market.

What Future for the Green Bond Market? How Can Policymakers, Companies, and Investors Unlock the Potential of the Green Bond Market?

“…This number appears small compared to the size of total European domiciled bond fund assets with about EUR 2.5 trillion as of December 2018 (Sewell 2019). The rising environmental awareness among investors contributes to an increased demand for green bonds and to oversubscriptions, thus enabling the funding of eco-friendly projects in a cheaper way (Agliardi and Agliardi 2019).…”

Corporate Green Bond Issuances: An International Evidence

“…The notion of "greenium" has also been treated by Agliardi and Agliardi (2019), who questioned the financial interest of a Green Bond as a funding tool. The authors conclude that this green premium, that would make Green bonds a cheaper than conventional bonds, might be even more present and important for Green bond issuances with a high underlying asset volatility, high parameters that govern the green underlying technology, and low corporate tax rates.…”

Intention of Tourism Practitioners to Behave Actively Prevent COVID-19 in Zhangjiajie

“…Onwezen & Bartels also found that practitioners who have a positive emotion of belonging to tourism are more inclined to engage in friendly behaviour towards tourists [12]. Agliardi E & Agliardi R point out some respondents linked protective behaviour to time costs and higher spending constraints, although most of them showed better awareness their hazards of the pandemic and more positive attitudes of preventing COVID-19 [13]. Olya and Akhshik also consider that the barriers of proactive protection behaviour, including money cost, emotional input and awareness of responsibility [14].…”