The impact of green bonds on issuers' environmental performance

Yiyang Chen, Christina Erlwein-Sayer, Rogemar Mamon, Fabio Spagnolo and Nicola Spagnolo

Quantitative Finance, 2026, vol. 26, issue 6, 993-1015

Abstract: A green bond is a widely utilised financial instrument designed for the purpose of funding environmentally friendly projects. The green bond's positive environmental effects are documented by previous investigations that largely rely on the Differences-in-Differences method to assess its overall impacts. In contrast, this paper employs a Controlled Interrupted Time Series model to investigate the influence of corporate green bonds on the environmental performance of issuers at the individual level. We perform two sequential experiments. Firstly, we probe into the factors that could influence the issuance of green bonds to produce a statistically significant effect on environmental performance. Secondly, we examine the interrelations between company characteristics, issuer characteristics, and the magnitude of the effects released by green bonds. For the first and second experiments, we implement random-forest-based and generalised-additive-based modelling approaches, respectively. These approaches allow us to explore non-linear relationships. We examine the various factors that are deemed to contribute to the efficacy of the green bonds. The effects on companies' environmental performance are assessed after issuing the green bonds in comparison to conventional bond issuers. Our findings reinforce the existing literature in which the environmental performance of most issuers improves following the issuance of green bonds. Whilst both bond and company characteristics influence the impact of green bonds, it is the company characteristics that play a more pivotal role. We show that the issuance of green bonds positively affects companies' environmental performance. Thus, policymakers must develop and implement policies that promote and support green financing to benefit the environment. It must be kept in mind that the characteristics of issuers are an important consideration alongside with the issuance of green bonds. So, company-wide strategies are necessary in addition to financial innovation to improve environmental performance.

Date: 2026
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DOI: 10.1080/14697688.2026.2641012

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