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Are green bonds funding the transition? Investigating the link between companies’ climate targets and green debt financing

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  • Heidi Tuhkanen
  • Gregor Vulturius

Abstract

Green bonds are considered one of the most important innovations in sustainable finance. However, there is a lack of conceptual and empirical understanding of the role of green bonds in corporate transition to carbon neutrality. This study develops and tests a conceptual framework that links green bonds to climate targets in the context of corporate transition risk management and polycentric climate governance. It is based on an analysis of the twenty largest European green bond issuers in 2018. We find that in most cases there is a disconnect between issuers’ climate targets and their green bond frameworks; and several shortcomings in issuers’ post-issuance reporting. Our results suggest that there is little pressure for green bond issuers to use their proceeds to achieve ambitious science-based targets. Our findings highlight the need for policy action to reduce the risk of greenwashing and to situate the green bond market within planetary boundaries.

Suggested Citation

  • Heidi Tuhkanen & Gregor Vulturius, 2022. "Are green bonds funding the transition? Investigating the link between companies’ climate targets and green debt financing," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 12(4), pages 1194-1216, October.
    • Handle: RePEc:taf:jsustf:v:12:y:2022:i:4:p:1194-1216
    DOI: 10.1080/20430795.2020.1857634
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    Cited by:

    1. Abhilash & Sandeep S. Shenoy & Dasharathraj K. Shetty & Lumen Shawn Lobo & Subrahmanya Kumar N., 2023. "Green Bond as an Innovative Financial Instrument in the Indian Financial Market: Insights From Systematic Literature Review Approach," SAGE Open, , vol. 13(2), pages 21582440231, June.
    2. Hannah Layman & H. Resit Akçakaya & Amanda Irwin & Sophus zu Ermgassen & Prue Addison & Mark Burgman, 2024. "Short‐term solutions to biodiversity conservation in portfolio construction: Forward‐looking disclosure and classification‐based metrics," Business Strategy and the Environment, Wiley Blackwell, vol. 33(3), pages 1778-1793, March.
    3. Gao, Yang & Zhou, Yueyi & Zhao, Longfeng, 2024. "Quantile interdependence and network connectedness between China's green financial and energy markets," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 1148-1177.
    4. Hong, Jifeng & Kazakis, Pantelis & Strieborny, Martin, 2024. "Green Bond Issuance by Firms, External Monitoring, and Probability of Default: An Empirical Research Based on Green Policies," MPRA Paper 123049, University Library of Munich, Germany.
    5. MingCan JI & Xing Zhang, 2024. "Assessing the Impacts and Mechanisms of Green Bond Financing on the Enhancement of Green Management and Technological Innovation in Environmental Conservation Enterprises," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 12709-12750, September.

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