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The performance of green bond portfolios under climate uncertainty: A comparative analysis with conventional and black bond portfolios

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  • Silva, Florinda
  • Ferreira, André
  • Cortez, Maria Céu

Abstract

Green bonds represent an important financial instrument for the allocation of financial resources towards a more climate-friendly and sustainable economy. This research evaluates and compares the financial performance of portfolios of green bonds, conventional bonds and black bonds issued on the international market. Overall, bond portfolios perform similarly to each other and to the benchmark. The results also show that black bond portfolios bear more default risk and are more sensitive to the equity market than other bond portfolios. We further analyze the conditional effect of climate risk and find evidence of time-varying bond portfolio performance according to climate policy uncertainty. Although green bond portfolios underperform in times of lower uncertainty, they significantly improve their performance and even outperform their matched black bond counterparts when concerns surrounding climate risk rise.

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  • Silva, Florinda & Ferreira, André & Cortez, Maria Céu, 2024. "The performance of green bond portfolios under climate uncertainty: A comparative analysis with conventional and black bond portfolios," Research in International Business and Finance, Elsevier, vol. 70(PA).
    • Handle: RePEc:eee:riibaf:v:70:y:2024:i:pa:s0275531924001478
    DOI: 10.1016/j.ribaf.2024.102354
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    More about this item

    Keywords

    Green bonds; Black bonds; Conventional bonds; Climate Policy Uncertainty; Portfolio performance evaluation; Green finance;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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