Menu Expand

The Efficiency of the Sustainability-Linked Bond Market for a Successful Sustainability Transition

  1. Journals
  2. Economics, Finance, Business & Management
  3. Vierteljahrshefte zur Wirtschaftsforschung
  4. Vol. 92, Issue 3
  5. pp. 91–112

JOURNAL ARTICLE

Cite JOURNAL ARTICLE

Style
Hinsche, I., Klump, R. The Efficiency of the Sustainability-Linked Bond Market for a Successful Sustainability Transition. Vierteljahrshefte zur Wirtschaftsforschung, 92(3), 91-112. https://doi.org/10.3790/vjh.92.3.91
Hinsche, Isabelle Cathérine and Klump, Rainer "The Efficiency of the Sustainability-Linked Bond Market for a Successful Sustainability Transition" Vierteljahrshefte zur Wirtschaftsforschung 92.3, 2023, 91-112. https://doi.org/10.3790/vjh.92.3.91
Hinsche, Isabelle Cathérine/Klump, Rainer (2023): The Efficiency of the Sustainability-Linked Bond Market for a Successful Sustainability Transition, in: Vierteljahrshefte zur Wirtschaftsforschung, vol. 92, iss. 3, 91-112, [online] https://doi.org/10.3790/vjh.92.3.91
Format
Download

The Efficiency of the Sustainability-Linked Bond Market for a Successful Sustainability Transition

Hinsche, Isabelle Cathérine | Klump, Rainer

Vierteljahrshefte zur Wirtschaftsforschung, Vol. 92 (2023), Iss. 3 : pp. 91–112

1 Citations (CrossRef)

Preview Login to order (PDF)

Additional Information

Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/vjh.92.3.91
Language
English
Pages
22
Keywords

Pricing

Individual
€ 26.00 (incl. local VAT if applicable)

Author Details

Isabelle Cathérine Hinsche, Department of Economy Policy & Quantitative Methods, Goethe University, Frankfurt

  • Isabelle Catherine Hinsche ist Doktorandin der Volkswirtschaftslehre an der Goethe Universität Frankfurt zum Thema Sustainable Finance. Sie hat Wirtschaftswissenschaften an der Universität Maastricht, der Fairfield University, der Goethe Universität und der Erasmus Universität Rotterdam studiert. Ihre Forschung befasst sich mit Sustainable Finance, insbesondere mit den der Markt- und Preismechanismen im Sustainable Finance Markt und dem Zusammenwirken von privaten Investitionen und staatlichen Regulierungen.
  • Email
  • Search in Google Scholar

Rainer Klump, Center for Financial Studies and Department of Economy Policy & Quantitative Methods, Goethe University, Frankfurt

  • Rainer Klump ist Professor für Volkswirtschaftslehre, insb. Wirtschaftspolitik an der Goethe-Universität Frankfurt am Main sowie Geschäftsführender Direktor des dortigen House of Finance. Er hat an den Universitäten Mainz, Paris I und Erlangen-Nürnberg studiert und promoviert und hatte Professuren an den Universitäten Würzburg und Ulm inne, bevor er nach Frankfurt wechselte. Seine Forschung befasst sich schwerpunktmäßig mit Wachstum, Entwicklung, Innovationen und Transformationsprozessen.
  • Email
  • Search in Google Scholar

Cited By

  1. Markets, Institutions, and Morality

    Klump, Rainer

    (2024) P.1

    https://doi.org/10.3790/schm.2024.356869 [Citations: 0]

References

  1. BaFin (2019): Merkblatt zum Umgang mit Nachhaltigkeitsrisiken. Bonn.  Google Scholar
  2. Berrada, T.,Engelhardt, L.,Gibson, R. and Krueger, Ph. (2022): The Economics of Sustainability Linked Bonds. Swiss Finance Institute Research Paper, (22 – 26).  Google Scholar
  3. Bundeskanzleramt (2020): Aus Verantwortung für Österreich. Regierungsprogramm 2020 – 2024. Retrieved from: https://www.bundeskanzleramt.gv.at/bundeskanzleramt/die-bundesregierung/regierungsdokumente.html (accessed 20 May 2023).  Google Scholar
  4. Caldecott, B. (2020): Achieving Alignment in Finance. EIT Climate-KIC, Aligning Finance for The Net Zero Economy, 1: 12 – 39. Retrieved from: https://www.climate-kic.org/wp-content/uploads/2020/09/200902_J932-CKIC-UNEP-ThoughtLeadershipSeries-DrBenCaldecott-1.pdf (accessed 20 May 2023).  Google Scholar
  5. CBI (2022a): Transition Finance for Transforming Companies. Retrieved from: https://www.climatebonds.net/files/files/Transition%20Finance/Transition-Finance-for-Transforming-Companies-6-Sept-2022.pdf (accessed 31 January 2023).  Google Scholar
  6. CBI (2022b): Green Bond Pricing in the Primary Market H1 2022. Retrieved from: https://www.climatebonds.net/files/reports/cbi_pricing_h1_2022_02g.pdf (accessed 31 January 2023).  Google Scholar
  7. D’Orazio, P. and Dirks, M. W. (2022): Exploring the effects of climate-related financial policies on carbon emissions in G20 countries: a panel quantile regression approach. Environmental Science and Pollution Research, 29(5), 7678 – 7702.  Google Scholar
  8. D’Orazio, P. and Thole, St. (2022): Climate-related financial policy index: a composite index to compare the engagement in green financial policymaking at the global level. Ecological Indicators, 141, 109065.  Google Scholar
  9. European Commission (2023a): European Green Deal. Retrieved from: https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal_en (accessed 31 January 2023).  Google Scholar
  10. European Commission (2023b): Sustainable Finance. Retrieved from: https://finance.ec.europa.eu/sustainable-finance_en (accessed 31 January 2023).  Google Scholar
  11. European Commission (2021): Sustainable Finance Strategy. Retrieved from: https://finance.ec.europa.eu/system/files/2021-07/210706-sustainable-finance-strategy-factsheet_en.pdf (accessed 31 January 2023).  Google Scholar
  12. European Commission (2020a): Financing Sustainable Growth. Retrieved from: https://finance.ec.europa.eu/system/files/2020-01/200108-financing-sustainable-growth-factsheet_en.pdf (accessed 31 January 2023).  Google Scholar
  13. European Commission (2019): Regulation on sustainability-related disclosures in the financial services sector. Retrieved from: https://eur-lex.europa.eu/legalcontent/ EN/TXT/PDF/?uri=CELEX:32019R2088&from=EN (accessed 31 January 2023).  Google Scholar
  14. Flammer, C. (2020): Green bonds: effectiveness and implications for public policy. Environmental and Energy Policy and the Economy, 1(1), 95 – 128.  Google Scholar
  15. Gianfrate, G. and Peri, M. (2019): The green advantage: Exploring the convenience of issuing green bonds. Journal of Cleaner Production, 219, 127 – 135.  Google Scholar
  16. Hinsche, I. C. (2021): A Greenium for the Next Generation EU Green Bonds Analysis of a Potential Green Bond Premium and its Drivers. Center for Financial Studies Working Paper, 663, 2021.  Google Scholar
  17. Hinsche, I. C. and Klump, R. (2023): Mirror, Mirror on the Wall, Who Is Transitioning Amongst Them All? Center for Financial Studies Working Paper, 712, 2023.  Google Scholar
  18. HVB (2022): Branchenstudie Nachhaltigkeit 2022. Retrieved from: https://www.hypovereinsbank.de/hvb/nachhaltigkeit/bedeutung-von-nachhaltigkeit/studien/studie-nachhaltigkeit-mittelstand (accessed 31 January 2023).  Google Scholar
  19. HVB (2021): Branchenstudie Nachhaltigkeit 2021. Retrieved from: https://www.hypovereinsbank.de/hvb/nachhaltigkeit/bedeutung-von-nachhaltigkeit/studien/studie-nachhaltigkeit (accessed 31 January 2023).  Google Scholar
  20. ICMA (2020): Sustainability-Linked Bond Principles. Retrieved from: https://www.icmagroup.org/assets/documents/Regulatory/Green-Bonds/June-2020/Sustainability-Linked-Bond-Principles-June-2020-171120.pdf (accessed 31 January 2023).  Google Scholar
  21. Ifm-Bonn (2022): Die ökologische Transformation gelingt nicht ohne KMU. Retrieved from: https://www.ifm-bonn.org/fileadmin/data/redaktion/ueber_uns/pressemitteilungen/PM-11-10-2022-International_Round_Table_on_SME.pdf (accessed 31 January 2023).  Google Scholar
  22. Kölbel, J. F. and Lambillon, A.-P. (2022): Who pays for sustainability? An analysis of sustainability-linked bonds (January 12, 2022).  Google Scholar
  23. Larcker, D. F. and Watts, E. M. (2020): Where’s the greenium?. Journal of Accounting and Economics, 69(2 – 3), 101312.  Google Scholar
  24. Liberadzki, M., Jaworski, P. and Liberadzki, K. (2021): Spread Analysis of the Sustainability-Linked Bonds Tied to an Issuer’s Greenhouse Gases Emissions Reduction Target. Energies, 14(23), 7918.  Google Scholar
  25. Liberatore, St. M. (2021): Sustainability-Linked Bonds Do Not Fit Our Impact Framework. Nuveen. Retrieved from: https://www.nuveen.com/global/insights/fixed-income/sustainability-linked-bonds-do-not-fit-our-impact-framework (accessed 31 January 2023).  Google Scholar
  26. Natixis (2021): Sustainability-Linked Bonds – Investors Views. Retrieved from: https://gsh.cib.natixis.com/api-website-feature/files/download/11818/SLB-Survey-Short-Results_2021-03-FinalVersion_LAST.pdf (accessed 31 January 2023).  Google Scholar
  27. Platform on Sustainable Finance (2021): Transition Finance Report. Retrieved from: https://finance.ec.europa.eu/system/files/2021-03/210319-eu-platform-transition-finance-report_en.pdf (accessed 31 January 2023).  Google Scholar
  28. Refinitiv (2022): Refinitiv ESG Scores Methodology. Retrieved from: https://www.refinitiv.com/content/dam/marketing/en_us/documents/methodology/refinitiv-esg-scores-methodology.pdf (accessed 31 January 2023).  Google Scholar
  29. Refinitiv (2023): ESG Scores – Shell PLC. Retrieved from: https://www.refinitiv.com/en/sustainable-finance/esg-scores (accessed 31 January 2023).  Google Scholar
  30. Schütze, F. and Stede, J. (2021): The EU sustainable finance taxonomy and its contribution to climate neutrality. Journal of Sustainable Finance & Investment, 1 – 33.  Google Scholar
  31. Steffen, B. (2021): A comparative analysis of green financial policy output in OECD countries. Environmental Research Letters, 16(7), 074031.  Google Scholar
  32. Vulturius, G.,Maltais, A. and Forsbacka, K. (2022): Sustainability-linked bonds–their potential to promote issuers’ transition to net-zero emissions and future research directions. Journal of Sustainable Finance & Investment, 1 – 12.  Google Scholar
  33. Wass, S. (2021): Sustainability-Linked Bonds in ‘Rapid Growth’ as More Firms Tap ESG Debt Market. Retrieved from: https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/ sustainability-linked-bonds-in-rapid-growth-as-more-firms-tap-esg-debt-market-65049789 (accessed 31 January 2023).  Google Scholar
  34. Zerbib, O. D. (2019): The effect of pro-environmental preferences on bond prices: Evidence from green bonds. Journal of Banking & Finance, 98, 39 – 60.  Google Scholar

Abstract

Summary: In order to reach climate neutrality by 2050, the European Union is taking action in the form of extensive sustainability regulations with the aim to push the private sector towards sustainable economic activities. In this context, a new instrument to finance a company’s sustainability transition has been developed: the sustainability-linked bond (SLB). This paper analyzes the SLB market’s efficiency in attracting those companies that are most crucial for a successful sustainability transition, namely carbon-intensive companies and companies that are lagging behind in their sustainability transition, defined as ESG laggards. By developing a conceptual framework for the SLB market and running a probit and logit regression estimation, this paper shows that the SLB market efficiently attracts carbon-intensive companies, but fails to attract ESG laggards. Moreover, the paper identifies four success factors for the SLB market to improve its future accessibility and credibility.

Table of Contents

Section Title Page Action Price
Isabelle Cathérine Hinsche und Rainer Klump:\nThe Efficiency of the Sustainability-Linked Bond Market for a Successful Sustainability Transition 91
1 Introduction 92
2 Literature Review 93
2.1 The European Green Deal Investment Plan 93
2.2 Transition Financing 94
2.3 Sustainability-Linked Bonds 95
2.4 Sustainability-Linked Bond Market 95
2.5 Risks and Challenges for Sustainability-Linked Bonds 96
3 Conceptual Framework 97
3.1 Sustainability Transformation Target Groups 98
3.2 Market Characteristics 99
3.3 Company Characteristics 99
3.4 Financial Characteristics 100
4 Methodology 100
4.1 Probit Choice Model 100
4.2 Data and Sample Selection 100
4.3 Data Summary 101
4.4 Empirical Methodology 101
5 Results 104
5.1 SLB Market Attracts Carbon-Intensive Industries – But Not ESG Laggards 104
5.2 Influential Market, Company and Financial Characteristics 106
6 Discussion and Conclusions 109
Literature 111

Contact

Duncker & Humblot GmbH Carl-Heinrich-Becker-Weg 9 12165 Berlin, Deutschland T: +49 30 790006-0

Quick Navigation

2024 Duncker & Humblot GmbH

Powered by CloudPublish

We use cookies to ensure that you get the best experience on our website. Learn more about how we use cookies.