Transnational Climate Governance and State Capacity: A Multilevel Analysis of Green Bond Certification

Abstract

Green bonds have become a key instrument for combating the climate crisis. To mitigate the risk of greenwashing, nongovernmental organizations and market participants have established transnational standards and certification schemes for the global governance of green bonds. This research aims to explain the variation in the adoption of certification across bonds and countries. By analyzing a data set of 4,682 green bonds from fifty-five countries between 2016 and 2020, the multilevel mixed-effects models indicate that an increase in participants in the Task Force on Climate-Related Financial Disclosures within a country positively correlates with the likelihood of domestic green bond issuers adopting the certification from the Climate Bonds Initiative (CBI). In countries with stronger state capacity to adopt climate laws and policies, green bond issuers are more likely to participate in the CBI certification. This study has implications for addressing the issue of greenwashing in the development of the green bond market.