Does the issuance of Green Bonds provide a cheaper source of capital to firms?

• Autor(a) principal: Franco, Bruno Miguel Olivença
• Data de Publicação: 2022
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/26445
• topic: Sustentabilidade -- Sustainability; Alteração climática -- Climate change; Green Bonds; Greenium; Green finance; Matching methods; Obrigações verdes; Finanças verdes; Métodos de correspondência

Climate change is a human-induced problem and, as such, it falls upon us to deal with it through mitigation and adaptation strategies, if we are to secure a clean, liveable World for current and future generations. However, to implement and follow these plans, there are substantial costs that surpass the public budget. Hence, finance plays a key role in developing financial instruments that can involve the private sector in advancing sustainability. Green Bonds are one of these innovations, requiring the issuer, with its Use of Proceeds clause, to allocate all its proceeds towards environmentally friendly projects. This dissertation tries to answer the following question: “Do Green Bonds have lower yields than Conventional Bonds?”. Using different matching methods and regression models, we did not find proof of the Green Bond premium, suggesting that investors are not willing to trade return for the support of greener projects. Determining if there is a difference in the pricing of Green and Conventional Bonds is key in the development and implementation of policies and initiatives to help the Green Bond Market unlock its full potential. Looking at our results, to further the green agenda, governments and policymakers should prioritise Green Bonds, increasing their attractiveness and differentiating them from their counterpart, by introducing, for instance, compensation or tax deduction policies.