From Junk Bonds to Green Bonds do Sustainability Ratings Matter?


The market for green bonds have been growing rapidly in recent years globally, thereby making them one of the most promising financial instruments to support environmental sustainability. For traditional corporate or sovereign bonds, rating agencies have been key actors to reduce information asymmetry to facilitate the development of debt markets. Sustainability ratings, audits and second or third party opinions (ā€˛sustainability ratingsā€¯, hereinafter) can play a similar role to verify the sustainable feature of green bonds which in turn can inform credit analysis and impact investment decisions. However, while there is no uniform definition for green bonds yet, common criteria and methodology for sustainability ratings is also lacking. The paper analyses the theoretical economic functions of sustainability ratings for green bonds and the current practical approaches in Europe and Asia for them. By the means of an empirical study of outstanding green bonds it aims at assessing the actual impact of sustainability ratings on green bond issues. Based on these results, the paper concludes by drawing some policy recommendations on the possible future development of green bond sustainability ratings.

Author Information
G�bor Gyura, University of PƩcs, Hungary

Paper Information
Conference: ECSEE2017
Stream: Economic Sustainability: Environmental Challenges and Economic Growth

This paper is part of the ECSEE2017 Conference Proceedings (View)
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Posted by James Alexander Gordon