An Extensive Green Bond Market Analysis from 2015 to 2021
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Climate change is indubitably one of the biggest challenges for humanity in the coming decades. While the interest in solving this problem has been increasing recently, the window to minimize the temperature increase to 1.5°C has also been narrowing. Therefore, the transition to low-carbon economies to reach the Paris Agreement is significantly vital for the future of our home. In this transition, finance is crucial in mobilizing capital toward low-carbon investments. Several innovative products are in the market to make this capital shift possible. Green Bonds are one of the recent products — they are very similar to conventional (vanilla) bonds but differ by applying an environmental label; this green label restricts the use of proceeds to green projects and assets exclusively. The green bond market and research interest in the topic have expanded over the years. Researchers are asking if this market expansion is an appropriate way to mitigate the adverse effects of environmental pollution. There are different opinions about the expansion’s effect on mitigation efforts. However, the details of the expansion of the Green Bond Market are mostly uncovered. The critical contribution of this research is to explore the details of the expansion of the market between 2015 and 2021. This thesis integrates the extensive literature review with data analysis and concludes with further questions and comments. This research utilizes the database of the Climate Bonds Initiative (CBI) to examine the expansion of the green bond market. Specifically, the study employs a quantitative approach through descriptive analysis and statistical tests to analyze 8111 self-labelled qualified green bonds and similar debt instruments from 2015 to 2021. By examining the data by region, country, issuer type, external reviewer, date, the issued amount in USD, currency, and use of proceeds, the study aims to provide answers to the overall expansion of the green bond market, market comparison between regions and countries, types of green bond market participants, and market share of opinion providers. Furthermore, the study utilizes statistical tests to provide insights into the use of proceeds as well as a regional analysis of green bonds. It was found that the growth of the green debt market did not result in advantages for many countries. Rather, a small number of countries, mainly developed ones, were the primary beneficiaries of the raised capital. This phenomenon, which we termed "concentration," was observed. This concentration creates a lack of diversity, and instead, the market is dependent on several key players. For instance, in the US, which is the largest green bond issuer, almost half of the country's total amount was issued by a single entity, while just four second-party opinion providers held 93% of the opinion market. Similarly, in China, only one issuer type was responsible for half of the total amount issued. Overall, the top ten countries in the world accounted for 73.4% of the total capital, further highlighting the market's concentration. Also, multilateral and national development banks failed to play an intermediary role in the green bond market in less developed regions. The findings of this study may be significant in encouraging key stakeholders to explore means of enhancing the benefits that underdeveloped and developing countries receive from the green bond market. In addition to the findings, the comprehensive database presented in this research serves as a crucial resource for further research into the green bond market's structure and dynamics. This database, characterized by its novelty and detailed market expansion structure, is an important tool for both researchers and policymakers aiming to assess the role of green bonds and policy in fostering sustainable development and climate change mitigation. Moreover, the database lays a solid foundation for examining the relationship between green bond issuances and the actual reduction of greenhouse gas emissions for further studies, helping to address the critical question of whether the green bond market is genuinely "green."
Cite this version of the work
Onurcan Gokkaya (2023). An Extensive Green Bond Market Analysis from 2015 to 2021. UWSpace. http://hdl.handle.net/10012/19273