Choices and effects of different green labels in the EU bond market

Zhou, Peng ORCID: https://orcid.org/0000-0002-4310-9474, Jin, Shijie, Mazouz, Khelifa ORCID: https://orcid.org/0000-0001-6711-1715 and Ding, Wenjie 2024. Choices and effects of different green labels in the EU bond market. Journal of Business Ethics 10.1007/s10551-024-05847-0 Item availability restricted.

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Abstract

This paper demonstrates that green-labeling forms an integral part of financial investment vehicles. We use data from the EU green bond market to show that green labels reduce the required yields on bonds (the “greenium”) in the long run, with the effect being more pronounced when labels are externally certified. We also find that green bonds can increase investors’ short-term attention when they are externally labeled. Further evidence suggests that the greenium of self-labeled green bonds is mainly attributed to a weak signaling effect, whereas that of externally labeled bonds results from a combination of signaling effect and pro-environmental preferences. Our findings indicate that investors value the reassurance that third-party certifications provide about the ethical use of bond proceeds. This highlights the potential benefits of introducing stricter oversight of green bond proceeds in the bond market.

Item Type:	Article
Date Type:	Published Online
Status:	In Press
Schools:	Business (Including Economics)
Publisher:	Springer
ISSN:	0167-4544
Date of First Compliant Deposit:	10 December 2024
Date of Acceptance:	23 October 2024
Last Modified:	11 Dec 2024 13:45
URI:	https://orca.cardiff.ac.uk/id/eprint/174656

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