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Project title

Risk disclosure in green bond prospectuses and its impact on pricing: An EU exploratory study

Primary Funding Agency

Irish Research Council

Co-Funding Organisation(s)

n/a

Lead Organisation

Waterford Institute of Technology

Lead Applicant

n/a

Project Abstract

Green bonds have become an important instrument in climate change mitigation. First issued in 2007 by the European Investment Bank and subsequently by a number of governments, issuance of these unique securities is expected to reach $1trillion by the end of 2020 as corporate issuers have entered the fray. Investor demand for such bonds has escalated due to the desire to incorporate environmental, social and governance parameters into investment decisions. For issuers, green bonds are more complex compared to conventional bonds due to the requirements for verification and the certification process of what constitutes green, ongoing monitoring of bond proceeds and subsequent independent review and evaluation. Europe is now a leading hub for green bonds accounting for over half of global issuances. To date, few studies have assessed the riskiness of green bonds for investors. This research seeks to examine the information disclosed in green bond prospectuses in order to unravel the nature and the extent of the risks for investors. Using a sample of 700 EU corporate green bond prospectuses from 2014 to 2020, a quantitative textual analysis will examine the risk disclosure prior to issuance. The relationship between this risk disclosure and the initial pricing of the bonds will then be examined to ascertain how disclosure manifests itself into price. The research is timely as it will assess the impacts of sustainable finance disclosures and price prior to the EU Green Deal. The findings will contribute to the academic literature where there is a paucity of research on the risks from sustainable debt financing. Furthermore, the findings will be of interest to the investment community, especially institutional investors, as it will shed new insights into the riskiness of green bonds. It will also be of interest to green bond issuers, and policymakers, including the European Commission.

Grant Approved

�52,500

Research Hub

Climate related research

Research Theme

Achieving climate neutrality by 2050.

Start Date

01/10/2021

Initial Projected Completion Date

30/09/2023