Mobilizing the debt market for climate change mitigation. Experiences from the early Green Bonds market.

Abstract

Climate change will have a significant impact on modern society. The economic impacts from climate change require the involvement of both governments and companies. Green bonds have emerged as tool to earmark capital for green investments, but the question remains whether green bonds accelerate green investments. This study outlines the advantages and disadvantages of green bond issuances in order to identify why green bonds could result in accelerated green investments. The data is acquired through interviews with investors and issuers, a survey among European issuers as well as a case study at AkzoNobel. The study also asks the question how green bonds could reduce the environmental impacts from the chemical industry. The results indicate that there are significant benefits in terms of company reputation, access to capital and internal legitimacy linked to the issuance of a green bond. The case study also indicates that a green bond issuance can have implications on the internal hierarchy of decision making by the addition of an environmental dimension to evaluation of investments. A green bond may bridge the historic gap between financial and sustainability departments. The conclusion is that green bonds accelerate green investments, as green bonds provide issuers with access to capital, increased company reputation, increased internal legitimacy for sustainability issues and shift decision power within companies. The efficiency of green bonds could be enhanced by the development of industry specific criteria, to have an impact along the entire value-chain to ensure significant environmental benefits.