How green bonds influence corporate environmental behaviour: A heterogeneous analysis

Previous studies have primarily focused on the link between Environmental, Social, and Governance (ESG) factors and green bonds. However, ESG metrics fail to comprehensively capture firms’ environmental behaviour. To gain a deeper understanding of how green bond issuance influences firms’ environmental performance, it is essential to examine its impact on Corporate Environmental Responsibility (CER). Despite its importance, this topic remains underexplored in empirical research. This paper constructs a theoretical framework and conducts an empirical analysis to investigate the impact of green bond issuances on CER performance. The results show that issuing green bonds significantly enhances CER scores. This positive effect stems from two key mechanisms: improved corporate financing conditions and increased transparency of environmental information disclosure. Specifically, the “earmarking” of green funds subsidises environmentally friendly projects, while regulatory requirements for green bond information disclosure encourage superior environmental performance. Additionally, the results reveal heterogeneous effects, with green bonds having a stronger impact on heavily polluting firms. Finally, we find that regulatory pressures and competitive market dynamics drive firms to issue green bonds as a strategy to boost their green reputation and gain a competitive advantage.