Is it risky to go green? A volatility analysis of the green bond market

Pham, Linh

doi:10.1080/20430795.2016.1237244

Cited by 219 publications

(80 citation statements)

References 23 publications

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“…Many researchers have focused on the relationship between green bonds and other markers. Pham [23] first provided evidence that the labelled green bond market is more volatile than the "unlabeled" bonds by using the Standard & Poor Co. (S&P) Green Bond Index. In a comparable study, Bachelet et al [24]confirmed that green bonds issued by institutional issuers have higher liquidity than gray bonds.…”

Section: Literature Reviewmentioning

confidence: 99%

Co-movement and Lead–Lag Relationship Between Green Bonds and Renewable Energy Stock Markets: Fresh Evidence from the Wavelet-Based Approach

Liu

2020

Preprint

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Background: A recent study in Nature Climate Change shows that due to reduced human activities during the Coronavirus disease 2019 (COVID-19) pandemics, daily global emissions of carbon dioxide decreased by 17% from the average level in 2019. With the gradual recovery of economic activity and human energy consumption, the emissions of greenhouse gas and pollution would rise again. Green bonds are considered a crucial tool to release climate finance. The green bond market can act as an essential bridge between capital providers (i.e. institutional investors) and sustainable assets (i.e. renewable energy).This study is the first attempt to examine co-movement and the lead–lag relationship between green bonds and global and sector renewable energy stock markets in the time and frequency horizons. We apply continuous wavelet, wavelet coherence, and line and non-line causality approaches on data during the period 2010–2020, coincidentally including the COVID-19 pandemic.Results: (1) Green bonds and renewable energy markets show evidence of a similar pattern based on the wavelet power spectrum, which shows high price volatility at small and medium scales, especially during periods of turbulence and crisis. (2) The dynamic connection between green bonds and renewable energy returns is weak (strong) on the short (long) time-scale. However, on medium-term time scales, the dependence between them is significant only during turbulent periods, such as the European Sovereign Debt Crisis 2012 (ESDC) and the COVID-19 pandemic. (3) With regard to causality, our results show unidirectional and bidirectional linear (non-linear) causality at low and high frequencies. Moreover, our finding reveals the fact regarding the lead–lag relationship that, most of the time and frequencies, no one market necessarily dominates the other.Conclusion: Our findings provide several remarkable policies and practical implications for market regulators and investors. Institutional investors can benefit by including green bonds in their portfolios to decrease their climate change risk and improve their environmental, social, and corporate governance rating in the portfolio. Considering that the dependence between green bonds and renewable energy stock prices varies over various time scales, investors with different investment horizons should make diverse investment portfolio and hedging choices. The finding is also relevant for formulating green finance policies and supporting renewable energy investments. Policy decisions on the transition of energy to a decarbonized economy should consider the consequences for green bonds, which are also critical for the transition to a climate-resilient economy.

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Section: Literature Reviewmentioning

confidence: 99%

Co-movement and Lead–Lag Relationship Between Green Bonds and Renewable Energy Stock Markets: Fresh Evidence from the Wavelet-Based Approach

Liu

2020

Preprint

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“…Presently, there is no unified definition of green bonds in the international community, and hence some scholars have undertaken comparative research on identification standards in relation to green bonds [8]. Pham studied the risks and price fluctuations of green bonds using a multivariate GARCH model [33], while Chiesa and Barua examined the factors affecting green bond issuance from the perspective of suppliers [34]. Hachenberg and Schiereck [9] and Zerbib [10] analyzed the differences between green bonds and traditional bonds in terms of pricing and rates of return.…”

Section: Green Bonds and Financial Performancementioning

confidence: 99%

Green Bonds, Corporate Performance, and Corporate Social Responsibility

2019

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Green bonds are a financial tool that has been vigorously promoted in the global green finance field in recent years. Since 2013, the global issuance of green bonds has seen explosive growth. China's green bond market has made great progress, rising to the top tier of global rankings. In this paper, Chinese listed companies that issue green bonds are used as the research object to explore the impact of green bond issuance on companies, including the impact of the announcement of green bond issuance on companies’ stock prices, as well as the impact of green bond issuance on companies’ financial performance and corporate social responsibility (CSR). The empirical results indicate that announcements of green bonds issuance have a positive impact not only on companies’ stock prices, companies' profitability, and operational performance, but also on innovation capacity, and can improve companies' CSR. Overall, the issuance of green bonds has a positive impact on companies, can contribute to environmental improvement, promotes CSR and value creation, and helps to attract investors to some extent.

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“…6 The emergence of green bonds has been explosive over the years as an innovative manner in which to mobilise private capital towards investing in 'green' projects. 7 Green bonds have been considered an integral component of climate finance because they appeal to investors who can reap financial benefits whilst also playing a role in investing in environmental and climate-related projects. 7 Green bonds have also appealed to the public sector, where governments and municipalities have begun to issue green bonds to meet their climate-change commitments by implementing their adaptation and mitigation strategies.…”

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confidence: 99%

“…7 Green bonds have been considered an integral component of climate finance because they appeal to investors who can reap financial benefits whilst also playing a role in investing in environmental and climate-related projects. 7 Green bonds have also appealed to the public sector, where governments and municipalities have begun to issue green bonds to meet their climate-change commitments by implementing their adaptation and mitigation strategies. 7 To date, South Africa is one of only a few African countries that have been active in the green bond sphere.…”

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confidence: 99%

“…7 Green bonds have also appealed to the public sector, where governments and municipalities have begun to issue green bonds to meet their climate-change commitments by implementing their adaptation and mitigation strategies. 7 To date, South Africa is one of only a few African countries that have been active in the green bond sphere. 8 Both the public and private sectors have issued green bondsthe proceeds of which have gone into renewable energy such as wind and solar projects, energy-efficient buildings as well as low-carbon infrastructure, e.g.…”

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The emergence of green bonds as an integral component of climate finance in South Africa

Ngwenya

Simatele

2020

S. Afr. J. Sci.

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One of the greatest challenges facing the global community is climate change. 1 Over many years, global leaders have embarked on various platforms in a concerted effort to combat climate change. 2 One of the key platforms has been the annual Conference of the Parties (COP)-a regular meeting in which climate negotiations and high-level political discussions have taken place. 2 In 2015, the 21st COP was the most important because 195 countries agreed to ensure that rising global temperatures do not exceed the safe zone of 1.5 °C, as it is forecasted that temperatures will continue beyond this value between 2030 and 2050 if no action is taken to combat climate change. 3 The parties further agreed that climate investments for countries are critical to make enormous transformational changes to reduce their greenhouse gases by scaling up climate adaptation and mitigation strategies. 3

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Is it risky to go green? A volatility analysis of the green bond market

Cited by 219 publications

References 23 publications

Co-movement and Lead–Lag Relationship Between Green Bonds and Renewable Energy Stock Markets: Fresh Evidence from the Wavelet-Based Approach

Co-movement and Lead–Lag Relationship Between Green Bonds and Renewable Energy Stock Markets: Fresh Evidence from the Wavelet-Based Approach

Green Bonds, Corporate Performance, and Corporate Social Responsibility

The emergence of green bonds as an integral component of climate finance in South Africa

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