Exploring the Relationship Between Green Bond Issuance and Energy-related SDGs in Emerging Market and Developing Economies

Abstract

In emerging market and developing economies (EMDEs), funds available for enabling the net-zero carbon transition are far below the level of investment required for a successful accomplishment. Nevertheless, a lot of EMDEs are making serious endeavours to deploy green financial instruments to support the transition. Among the internationally available financial instruments, green bonds (GBs) are especially significant due to their internationally regulated taxonomy, principles and classification of use of proceeds. The effectiveness of GB issuance is hard to measure but its relatedness to sustainable development goals (SDGs) has been proposed by the literature. This paper investigates the relationship between GB issuance and energy-related SDGs on the basis of a sample of 75 EMDEs in the period between 2000 and 2022. Besides renewable energy use and energy intensity, achievement of the ultimate goal of sustainable finances, carbon dioxide emission reduction, is also evaluated based on country-level statistics. We find only a few countries where all indicators have moved in the desired direction since the first issue of green bonds, and even fewer where this positive trend has persisted afterwards. Even when the short time series available for analysis is taken into account, the findings suggest that the dominance of renewable energy investment among the uses of GB proceeds does not necessarily entail any progress towards the net-zero emission targets. Overall, this highlights the necessity of stronger policy commitment and control.