Practical Applications of Green Bonds and Green Bond Funds: The Quest for the Real Impact

Abstract

Practical Applications In Green Bonds and Green Bond Funds: The Quest for the Real Impact, from the Summer 2020 issue of The Journal of Alternative Investments, author Gabor Gyura (of the University of Pecs in Hungary) investigates whether the rise of green bonds can be expected to lead to the completion of more environmentally friendly projects. Green bond issuance has grown dramatically in recent years, and green bond mutual funds are working hard to catch up. However, Gyura notes that not all green bonds finance high-profile environmental efforts like climate change mitigation, and some green bond funds invest more heavily than others in bonds that specifically fund such projects. Gyura also conducted a worldwide survey of bond issuers to determine whether issuing green bonds helped them complete more green projects. His results suggest the answer is no. Most respondents said their green projects would have been completed whether they had issued bonds labeled as green or not—and the main reason they issue green-labeled bonds is to improve their reputation and help them enter the green-finance market. Therefore, Gyura says there is little evidence that the growth of the green bond market will help to complete more green projects.