Green Bond Market Linkages: An Empirical Study

Bart Reumkens and Lisa Sheenan

Chapter 3 in Handbook of Environmental and Green Finance:Toward a Sustainable Future, 2024, pp 83-106 from World Scientific Publishing Co. Pte. Ltd.

Abstract: Green bonds are viewed as a powerful tool in the fight against climate change and are rapidly growing in popularity with investors. This chapter provides an overview of green bonds and the green bond market, potential concerns associated with it, and regulatory responses to some of these. We then test for contagion from green bond markets to volatility, fixed income, equity, and gold and sovereign markets using a vector autoregression (VAR) framework as outlined by Longstaff (2010). Our results suggest that green bonds do not serve as a contagion channel to the other markets during higher volatility periods and themselves are significantly affected only by corporate bond markets during such times. This could indicate that these bonds serve as safe haven assets for these markets and have important implications for investors, other market participants, and policymakers seeking to identify and monitor linkages to and from this hugely popular fledgling market.

Keywords: Green and Impact Bonds; Green Banking and Financing; Green Finance in Europe; ESG Performance; Climate Change; Climate Justice; Green Mortgages; Sustainable Transition; Renewable Energies; Green Transition in The EU (search for similar items in EconPapers)
JEL-codes: Q01 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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