DOES TRANSPARENCY PAY OFF FOR GREEN BONDS' ISSUERS? EVIDENCE FROM EU STATE AGENCIES' GREEN BONDS

This paper investigates the impact of transparent allocation of proceeds on green bonds' yields, providing insights to green bonds' issuers for optimizing their financing terms. Using data from the EU state agencies' green bond market, we applied a Prais-Winsten regression model with...

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Bibliographic Details
Published in:Ekonomika poljoprivrede (1979) 2023-10, Vol.70 (4), p.997-1007
Main Authors: Kovačević, Vlado, Janković, Irena, Vasié, Vladimir, Ijumovič, Isidora
Format: Article
Language:English
Subjects:
Bond issues
Bond markets
Bonding
Classification
Climate change
Credit ratings
Financing
High yield investments
Investors
Pricing policies
Regression models
Social responsibility
Sustainability
Transparency
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Summary:This paper investigates the impact of transparent allocation of proceeds on green bonds' yields, providing insights to green bonds' issuers for optimizing their financing terms. Using data from the EU state agencies' green bond market, we applied a Prais-Winsten regression model with correlated panels corrected standard errors and common AR(1) to estimate the relationship between green bonds' yields and various factors, including the transparency of proceeds. Transparent allocation of proceeds has a negative effect on green bonds' yields, confirming that investors require lower returns when they are well-informed about a bond's environmental goals. Additionally, higher credit ratings, and shorter remaining maturity are associated with lower green bonds' yields. Transparent use of proceeds significantly influences green bonds' yields, demonstrating that specifying the use of bond proceeds for environmentally friendly projects can lead to more favorable financing terms. Future research direction should provide additional classification of the green bonds' transparency.
ISSN:0352-3462
DOI:10.59267/ekoPolj2304997K