The Interest Costs of Green Bonds: Credit Ratings, Corporate Social Responsibility, and Certification

Zhiyong Li, Ying Tang, Jingya Wu, Junfeng Zhang and Qi Lv

Emerging Markets Finance and Trade, 2020, vol. 56, issue 12, 2679-2692

Abstract: In recent years, green financing has attracted global attention. Many countries and international organizations have proposed frameworks for developing green financing, and an increasing number of companies issue green bonds as financial instruments for funding green projects. Unlike conventional bonds, green bonds have unique features, and their issuance follows a special process. We use data on Chinese green bonds in a linear regression model to empirically explore the impact of credit ratings, corporate social responsibility (CSR), and green certification on yield spreads. The results show that these factors all have a significant impact on interest costs. Issuing green bonds is a signal of CSR, and green bonds with green certificates have lower interest costs than those without them. Finally, we outline some policy implications regarding the governance of green bonds based on our findings.

Date: 2020
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DOI: 10.1080/1540496X.2018.1548350

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