The Socio-Economic Determinants of Green Bond Issuance

Abstract

Global awareness of the climate change risks draws society’s attention to issues of financing environmentally friendly projects. In this context, green bonds are a new financial instrument used exclusively for financing environmentally friendly projects. A wide range of issuers, from small firms to international corporations, can use green bonds to raise funds for environmentally friendly projects. In recent years, the green bonds market has been developing rapidly in the world. Financing the recovery of Ukraine after the Russian invasion and European integration requires launching this market in Ukraine as well. This will increase the scope of infrastructure projects financing in the field of alternative energy and energy efficiency, reduce greenhouse gas emissions and consumption of fuel and energy resources, and improve Ukraine’s investment attractiveness and competitiveness. The green bond market operates under the influence of numerous factors that have both direct and indirect effects on it. The article examines the relationship between the volume of green bond issuance in the world in 2021, when its jump-like growth took place, and the factors that characterize the environmental, social, governance and macroeconomic spheres of the сountry. The research was conducted on the dataset of socio-economic indicators of 54 countries. Correlation and regression analysis was used to determine the cause-and-effect relationship between variables, as well as the variables that have the greatest impact on the volume of green bond issuance. The obtained results of the study indicate that countries with a higher volume of green bond issuance are primarily characterized by good credit ratings, which increases investor confidence, better economic development and a large population. Understanding the socio-economic determinants of green bond issuance will help market participants make informed decisions. The research results can be applied in the process of forming and implementing the state policy of Ukraine to achieve the Sustainable Development Goals.