Do Green Bonds Improve the Stock and Environmental Performance of Energy Firms? International Evidence

Given that the global decarbonization of the energy sector entails huge amount of investment, green bonds have become an important tool and source of long-term capital for energy firms. This chapter examines the impact of green bond issuance on their stock and environmental performance. We analyze a sample of 239 green bonds issued by 80 unique energy firms in the period 2013–2021. We first follow the event study methodology and find that market reaction to green bond issuance announcements is largely positive. Using the difference-in-differences approach, we then show that energy firms generally perform better in their environmental practices. However, our results also imply that green bond issuance has a lagged and temporary effect on stock prices and environmental achievements are not that obvious, particularly in the short term. We draw attention to partly inconclusive nature of these findings emerging from our analyses and offer relevant policy implications for green bond market development on the basis of tackling with greenwashing and scaling up the market share.