Research Handbook of Finance and Sustainability
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Research Handbook of Finance and Sustainability

Edited by Sabri Boubaker, Douglas Cumming and Duc K. Nguyen

The severe consequences of the global financial crisis 2008-2009 and numerous accounting frauds and financial scandals over the last fifteen years have let to calls for more ethical and responsible actions in all economic activities including consumption, investing, governance and regulation. Despite the fact that ethics in business and corporate social responsibility rules have been adopted in various countries, more efforts have to be devoted to motivate and empower more actors to integrate ethical behavior and rules in making business and managerial decisions. The Research Handbook of Finance and Sustainability will provide the readers but particularly investors, managers, and policymakers with comprehensive coverage of the issues at the crossroads of finance, ethics and sustainable development as well as proposed solutions, while focusing on three different levels: corporations, investment funds, and financial markets.
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Chapter 11: Issue spread determinants in the green bond market: The role of second party reviews and of the Green Bond Principles

Stefano Gatti and Andrea Florio


The green bonds market has experienced an exceptional growth since inception in June 2007 and, as of September 2015, accounted for roughly USD72 billion. The expansion has been fuelled by investors and issuers’ demand for increasing standardization and continuous innovation. This chapter investigates the impact of these developments on the evolution of the market and, in particular, on the cost borne by issuers of green bonds (as measured by the issue spread). Green bonds issued from June 2007 to 10 September 2015 (i.e., 417 observations) are considered in order to answer whether the issue spreads have been affected by the introduction of the Green Bond Principles in January 2014 and by the adoption of second party reviews. Our empirical findings lead to two main conclusions: (1) the introduction of the Green Bond Principles was pivotal for bonds with worse credit ratings to be able to enter the market; (2) green bonds accompanied by a second party review are, on average, issued at a lower spread than those without one.

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