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The Impact of the Creation of a Sovereign ESG Reference Yield Curve on Corporate ESG Bonds Issuances from Latin American and Caribbean

Author

Listed:
  • Cunha, Daniel
  • Craveiro, Giovana
  • Rossi, Marina

Abstract

This paper explores a granular database from the Inter-American Development Bank (IDB) Green Bond Transparency Platform covering the issuance of 430 corporate and sovereign Environmental, Social, and Governance (ESG) bonds in Latin America and the Caribbean (LAC) that are outstanding in international markets. The goal was to investigate how the creation of a sovereign ESG reference yield curve can boost the private ESG bond market. Using a difference-in-differences (DID) approach, we empirically estimate that the creation of a sovereign ESG reference curve roughly leads to a 60 percent increase in the volume of corporate bond issuances and a 25 percent increase in the number of ESG corporate bond issuances in the external markets after three years. On the mechanisms, we argue that the sovereign ESG reference yield curve works as a benchmark for private sector ESG bond issuers by providing a standard against which the performance of ESG bonds can be measured.

Suggested Citation

  • Cunha, Daniel & Craveiro, Giovana & Rossi, Marina, 2024. "The Impact of the Creation of a Sovereign ESG Reference Yield Curve on Corporate ESG Bonds Issuances from Latin American and Caribbean," IDB Publications (Working Papers) 13452, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:13452
    DOI: http://dx.doi.org/10.18235/0012859
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    References listed on IDEAS

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    1. Mr. Tonny Lybek & Mr. Abdourahmane Sarr, 2002. "Measuring Liquidity in Financial Markets," IMF Working Papers 2002/232, International Monetary Fund.
    2. Sun, Liyang & Abraham, Sarah, 2021. "Estimating dynamic treatment effects in event studies with heterogeneous treatment effects," Journal of Econometrics, Elsevier, vol. 225(2), pages 175-199.
    3. Rohit Goel & Deepali Gautam & Mr. Fabio M Natalucci, 2022. "Sustainable Finance in Emerging Markets: Evolution, Challenges, and Policy Priorities," IMF Working Papers 2022/182, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ESG; thematic bond; green; Social; Sustainability; sustainability-linked bond; debt capital markets; sovereign debt; LAC; corporate sector; international markets;
    All these keywords.

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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