Green bonds and corporate environmental performance: The role of third-party certification

As global green bond (GB) markets expand, concerns about greenwashing persist, especially where third-party certification is voluntary and fragmented. We are among the first to provide micro-level evidence from a major emerging market (China) that voluntary third-party certification of GBs delivers no added environmental benefit and can induce strategic R&D manipulation, while clarifying when and how GBs translate into real outcomes. Using Chinese listed firms from 2015 to 2022 and a multi-period difference-in-differences design, we find that GB issuance improves environmental scores primarily by boosting R&D outlays and green innovation; however, certification—despite lowering agency costs and further increasing reported R&D—does not translate into more green patents or higher environmental performance. Mechanism tests indicate “R&D manipulation,” wherein certified issuers inflate reported R&D that fails to convert into innovation outputs; this pattern is strongest in less regulated, finance-dependent firms and coincides with reduced post-certification capital expenditures suggestive of short-termism. Heterogeneity analyses show benefits concentrated in heavily polluting industries, with private firms exhibiting heightened greenwashing risk. These results support policies that unify certification standards, consider mandatory sector-specific criteria, and strengthen ex-post performance monitoring over the bond's life.