The Economics of Sustainability Bond Choice: Governance, Flexibility, and Greenwashing

Riadh Ben Jelili (), Olivier Adoukonou (), Youssef Fahmi () and Jean-Laurent Viviani ()
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Riadh Ben Jelili: LEGO - Laboratoire d'Economie et de Gestion de l'Ouest - UBS - Université de Bretagne Sud - UBO EPE - Université de Brest - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO EPE - Université de Brest - UBL - Université Bretagne Loire - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris], Brest IAE - Institut d'Administration des Entreprises (IAE) - Brest - UBO EPE - Université de Brest - Bretagne INP - Institut National Polytechnique de Bretagne
Olivier Adoukonou: UBS - Université de Bretagne Sud, LEGO - Laboratoire d'Economie et de Gestion de l'Ouest - UBS - Université de Bretagne Sud - UBO EPE - Université de Brest - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO EPE - Université de Brest - UBL - Université Bretagne Loire - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris]
Youssef Fahmi: LEGO - Laboratoire d'Economie et de Gestion de l'Ouest - UBS - Université de Bretagne Sud - UBO EPE - Université de Brest - IMT - Institut Mines-Télécom [Paris] - IBSHS - Institut Brestois des Sciences de l'Homme et de la Société - UBO EPE - Université de Brest - UBL - Université Bretagne Loire - IMT Atlantique - IMT Atlantique - IMT - Institut Mines-Télécom [Paris]
Jean-Laurent Viviani: CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper presents a unified theoretical and empirical framework to explain how firms choose among Green Bonds (GB), Social Bonds (SOB), Sustainability Bonds (SUB), and Sustainability-Linked Bonds (SLB). The first contribution is a signaling model that demonstrates how instrument choice reflects firms' project pipelines, flexibility needs, governance quality, and exposure to greenwashing penalties, resulting in clear differentiation across bond types. The model suggests a credibility gap in SLBs, as weaker verification and lower detectability make them particularly appealing to firms with low-disclosure or transition-constrained characteristics. The second contribution is empirical. By analyzing a global data set of 1,620 issuances and using a multivariate Probit model, we provide evidence consistent with the key mechanisms of the model: firms with strong governance and high-disclosure preferences tend to choose use-ofproceeds instruments, while financially constrained, hard-to-abate, or weakly governed firms are more likely to opt for SLBs. These findings emphasize the importance of governance in sustainable bond markets and highlight the necessity for stronger SLB standards and standardized ESG disclosures.

Date: 2026-06-01
Note: View the original document on HAL open archive server: https://hal.science/hal-05737190v1
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Published in The 42nd international conference of the French Finance Association (AFFI), IAE Clermont Auvergne - School of Management, Jun 2026, Clermont-Ferrand, France

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