Green finance is a new trend in countries’
future financial development, which has far-reaching significance for build
resilience against the impacts of climate change and reduce greenhouse gas
emissions. Whereas due to the importance of this issue, the financial
institutions tend to use financial derivatives such as green credit and green
bonds to help transform the economy to green. Hence, this paper investigates the impact
of green bonds on the banking sector annually from the 2013 up to 2021 for 14
countries, focusing on emerging and developed markets. Green bonds have been
measured by log total value of green bonds and green bonds to GDP, while the
performance of banking sector is measured by capital adequacy and
profitability. Using panel data, the findings indicate
that there is a significant impact of the green bonds on banking sectors
performance in certain markets. Overall, the results reveal the significant
impact of green bond on the performance of banks' sector, most notably on the
capital adequacy. This has to be more elaborated through further research to
investigate the effect of green bonds on Stock market.
JEL classification numbers: E58, G21, Q54, Q58.
Keywords: Banking Sector,
Developed Markets, Emerging Markets, Financial performance, Green Bonds,
Greenhouse Gas Emissions.