Conference Agenda

This paper examines the relationship between ownership structure and green bond issuance by firms in 18 Western European countries from 2014 to 2023. Using a matched sample of green and non-green bond issuers, regression analysis reveals that institutional ownership significantly influences a firm's likelihood of issuing green bonds. Specifically, larger firms are more likely to issue green bonds, while those with higher institutional ownership are less likely to do so. These findings contribute to the understanding of how ownership structure impacts corporate sustainability financing, offering insights for investors, policymakers, and firms.

This study investigates whether sustainable corporate loans (SCLs) are priced at a discount, known as a "greenium," or if they incur a risk premium, with a focus on regional disparities. Drawing a sample of loans issued between 2016 and 2024, the study compares SCLs to equivalent conventional syndicated loans from the same borrowers. The findings indicate a significant reduction in loan spreads, with an average decrease of approximately 30 basis points (bps) across the sample. This effect is more pronounced in European markets, where loan spreads decline by 41 basis points. Conversely, this pricing advantage is absent in North America and other regions, indicating that SCLs may not universally offer cost benefits and could even attract a risk premium in less mature markets. These results underscore the influence of regulatory frameworks, investor demand, and market maturity on sustainable lending practices. Implications suggest that financial institutions in regions with robust ESG regulations might provide more favorable loan terms, while firms seeking cost-effective financing should consider engaging with sustainability-linked lending markets. Policymakers are encouraged to enhance ESG disclosure requirements and standardize sustainability-linked loan structures to promote broader adoption and consistent pricing across markets.

The instability in firms’ green investment in recent times provides us with the opportunity to revisit the question of how the firms’ credit constraints (CC) affect their green investment adoption. This analysis is an attempt to contribute to the limited understanding of how the responses of firms’ green investments to their financial constraints vary with their size. We source the firm-level data from a unique “World Bank Enterprise Survey” (WBES) with a “green economy module”. Given the categorical nature of green investment, we apply the ordered logit model. We use binary as well as categorical indicators (with three categories: no obstacle, moderate obstacle, major obstacle) of CC. The findings reveal the overall negative impact of CC on both capita-intensive green investment (CIGI) and non-capital-intensive green investment (NCIGI). CIGI is categorised into three groups: no CIGI, moderate CIGI and high CIGI. NCIGI has four categories: no NCIGI, low NCIGI, moderate NCIGI and high NCIGI. For a credit-constrained firm (CCF), the probability of not making any type of GI increases compared to a credit-constrained firm (CUF). Further, the probability of making high CIGI decreases for all sizes of CCFs compared to CUFs, with large firms showing the highest fall. Similarly, the probability for moderate and high degrees of NCIGI decreases for CCFs compared to CUFs. However, this effect is only observed for large firms; small and medium firms do not show any significant change in probability. In the same manner, for Overall GI, the probability is significantly lower for large-size CCFs compared to CUFs.

While considering the categorical CC, we find that the probability of making high CIGI is lower for large firms with major obstacles; for small and medium-sized firms, these obstacles do not bring a very significant difference in the probabilities of making any type of CIGI. Similarly, the probabilities of moderate and high degrees of making NCIGI are lower for firms with moderate and major obstacles compared to firms with no obstacles. However, the probability of making a low degree of NCIGI is higher for firms with moderate and major obstacles compared to firms with no obstacles. All in all, the findings show the adverse impact of financial constraints for moderate and high degrees of GI. Further, these findings are more pronounced for large firms. Hence, we conclude that financial constraints are inhibiting the moderate to high level of green investment for firms of all sizes, with stronger adverse impacts for large firms. In light of these findings, it is recommended that regulatory requirements for sustainable business practices be streamlined based on firms’ size and degree of financial constraints. Since CIGI and NCIGI differ in their financing requirements, it will help the regulators rationalize the availability of finances to firms according to the types and degrees of green investments they make.

‘Public announcement dates’ are used as a reference point in green bond studies to measure investor reactions to upcoming green bond issues. Our study examines pre-public information leakages relating to upcoming green bond announcements on stock market reactions. From a candidate set of 2,036 ‘Bloomberg News’ and ‘Bloomberg First Word’ headlines gathered between 2016 and 2022, we identify 259 instances of green bond-related information being anonymously announced before being publicly announced by the issuing firm. These pre-announcement leaks significantly alter the trading dynamics of the issuing firms. Significant negative returns and increased trading volumes are observed in the underlying equity following news leakages relating to green bond issuances. These negative investor reactions are concentrated in pre-public news linked to financial firms, and leaks that arrive pre-market or early in market trading. We also find equity price movements following news leaks can be explained to a greater degree than following public announcements. Firm characteristics (Tobin’s Q, free cash flow, and ROA) are particularly influential in guiding investor reactions to pre-public information, while bond characteristics (average term and coupon rate) are more influential in guiding investor reactions to public announcements.

Our results suggest that information leakages have a strong impact on market behaviour, and should be accounted for in green bond literature. Our findings also have broader ramifications for financial literature going forward. Privileged access to financially-material information, courtesy of the ubiquitous use of Bloomberg Terminals by professional investors, highlights the need for news-based event studies to consider wider sets of communication channels to confirm the date at which information becomes available to different sets of investors.