Journal of Applied Finance & Banking

The Impact of Green Bonds on Banking Sector Performance: A Comparative Study on Developed and Emerging Markets

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  • Abstract

     

    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.