Green Bonds: Filling the Sustainable Development Goals Gap - Investigating the Role of Green Bonds in Financing the Achievement of the SDGs

Abstract

Lately, the concept of sustainability has gained growing importance, leading to the creation of financial instruments to address pressing environmental concerns. Among these, green bonds have become a significant tool, aligning financial efforts with environmental preservation and economic growth. This thesis investigates the role of green bonds in achieving the Sustainable Development Goals (SDGs) compared to conventional bonds. It examines the effectiveness of green bonds, explores the influence of the country of issuance, and assesses their impact on firm profitability. Using Ordinary Least Squares (OLS) regression models and a dataset of bonds issued in 2023 across different countries, the study finds that green bonds significantly enhance SDG scores compared to conventional bonds. The impact of green bonds varies by country, with nations having robust regulatory frameworks and supportive policies, such as Denmark and the Netherlands, demonstrating greater benefits. However, green bond issuance shows a negative impact on Return on Assets (ROA), indicating that the financial benefits of these bonds may take longer to materialize. The study underscores the need for a long-term perspective in evaluating green investments and highlights the importance of supportive national policies. Recommendations for future research include exploring longer lag periods, employing longitudinal approaches, and addressing bond misclassification. The research contributes to the field of sustainable finance by providing empirical evidence on the effectiveness of green bonds in achieving SDGs. It also offers insightful information for policymakers, investors, and firms on leveraging green bonds to achieve sustainability targets.