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Green Bonds’ Reputation Effect and Its Impact on the Financing Costs of the Real Estate Sector

Discussion Papers 2019, 25 S.

Aleksandar Petreski, Dorothea Schäfer, Andreas Stephan


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This paper explores the effect of a firm’s reputation of being a green bond issuer on its financing costs. Using a sample of 73 listed Swedish real estate companies issuing in total about 1500 bonds over the period from 2011 till 2021, difference-in-difference analyses and instrumental variable estimations are applied to identify the causal impact of frequent green vis-à-vis frequent non-green bond issuing on a firm’s cost of capital and credit rating. The paper argues that it is repetitive issuance which lowers a firm’s cost of capital, while the effects from first or one-time green bond issuance is the opposite. In line with the reputation capital hypothesis, issuing green bonds even lowers the firm’s cost of equity capital, while issuing non-green bonds has no effect on the cost of equity capital.

Dorothea Schäfer

Research Director Financial Markets in the Macroeconomics Department

JEL-Classification: G32;R30;R32
Keywords: Bond issuance, green debt, reputation capital, sustainability, ESG