Investing in a greener tomorrow: Unveiling the potential of green and transition bonds in environmental goal realization

Abstract

In this study I look into the relationship between green and transition bonds and their impact on achieving the climate change mitigation targets of their issuers. I determine whether purchasing green bonds is a better way to invest in the environmentally friendly future or whether transition can be a game changer in impact investing in fixed-income market. By using comparison analysis to determine the effect of bonds by comparing historical emissions and Scope 1 and 2 of issuers with the level after issuance of green or transition bond. I found that green bonds have an insignificant impact in reducing CO2 emissions, indicating limited effectiveness in achieving environmental goal. I also discovered an unexpected positive coefficient for transition bonds. Based on my findings, I conclude that alternative strategies may be necessary to address CO2 emissions and promote sustainable development.