Do Green Bonds Contribute to Measurable Improvements in the Environmental Performance of European Companies?

Details

Supervisors

Shrestha, Prabal

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion, à finalité spécialisée

Abstract

enThis thesis investigates the environmental impact of green bonds in Europe, addressing the question: “Do green bonds contribute to measurable improvements in the environmental performance of European companies?” Using a Difference-in-Differences methodology inspired by Flammer (2021), the analysis relies on a matched panel of firms observed between 2015 and 2023, focusing on CO₂ emissions per sales and ESG scores as key outcome indicators. Results indicate a statistically significant decline in emissions from the second year after issuance, suggesting that green bonds can support long-term environmental progress when properly implemented. Moreover, the analysis reveals that this effect is more pronounced in countries with strong institutional quality measured through the World Governance Indicators and in those with stringent environmental regulations, based on the OECD’s Environmental Policy Stringency index. These findings highlight the crucial role of governance and policy context in shaping the actual impact of green financial instruments. By shedding light on the conditional effectiveness of green bonds, this study contributes to the literature on sustainable finance and provides relevant insights for policymakers, investors, and researchers aiming to enhance the environmental credibility and real-world performance of green finance initiatives.