Template-Type: ReDIF-Paper 1.0
Author-Name: Gong Cheng
Author-X-Name-First: Gong
Author-X-Name-Last: Cheng
Author-Name: Torsten Ehlers
Author-X-Name-First: Torsten
Author-X-Name-Last: Ehlers
Author-Name: Frank Packer
Author-X-Name-First: Frank
Author-X-Name-Last: Packer
Author-Name:Yanzhe Xiao
Author-X-Name-First: Yanzhe
Author-X-Name-Last: Xiao
Title: Sovereign green bonds: a catalyst for sustainable debt market development?
Abstract: In traditional bond markets, sovereign bonds provide benchmarks and serve as catalysts for corporate bond market development. Contrary to the usual sequence of bond market development, sovereign issuers are latecomers to sustainable bond markets. Yet, our empirical study finds that sovereign green bond issuance can have quantitative and qualitative benefits for the development of private sustainable bond markets. Our results suggest that both the number and the size of corporate green bond issuance increase more in a jurisdiction after the sovereign debut. The results are more pronounced in countries with stronger climate policies. Sovereign green bond issuance also improves the quality of green verification standards in the corporate bond market more generally, consistent with the aim of fostering third-party reviews and promoting best practice in green reporting and verification. Finally, our work provides evidence that the sovereign debut increases liquidity and diminishes yield spreads of corporate green bonds in the same jurisdiction.
Creation-Date: 2024-07
File-URL: https://www.bis.org/publ/work1198.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1198.htm
File-Format: text/html
Number: 1198
Keywords: green bonds, sustainable bonds, sovereign debt, taxonomies, green verification, bond market development
Classification-JEL: H63, O16, Q01, Q50
Handle: RePEc:bis:biswps:1198