Green Bond Issuance Effect on Environmental and Social Performance: Evidence From an International Sample

We study how first-time green bond (GB) issuances impact the environmental and social performance (ESP) of issuers. If GB issuances signal the issuer's commitment to sustainable development, rating agencies should positively adjust ESG scores, assuming no opportunistic behavior or rating inefficiencies. Using a global GB issuance dataset, we employ a difference-in-differences approach to compare ESP scores of GB issuers (treatment group) with those of non-GB issuers (control group). Compared to non-GB issuers, GB issuers experience enhanced ESP after their first GB issuance, with stronger results for firms with lower ESG scores pre-issuance. Higher environmental performance is driven by reduced carbon emissions, while improved social performance is driven by better workforce, human rights, and community scores. GB issuances reduce firms’ likelihood of ESG controversies. These findings contribute to our understanding of the factors driving the GB–ESG nexus and have implications for policymakers, investors, and issuers interested in integrating or promoting sustainability practices.