Central bank policies and green bond issuance on a global scale

Abstract

We employ recently released IMF data to examine the impact of central bank supervision policies on green bond issuance in sixty-six countries during 1992–2021. We introduce three novel metrics to assess central banks' supervisory authority: the breadth of their supervision mandates, the intensity of monitoring and enforcement, and the power of utilization of systemic risk tools. Countries with central banks possessing broader supervisory mandates and actively employing systemic risk tools are broadly associated with higher overall values of green bond issuance. Conversely, higher monitoring and enforcement intensity is associated with lower issuance values. These effects are pronounced in the realm of private green bond issuance and less prominent in government bond issuance where the government has a strong role. While the efficient functioning of financial institutions and the quality of ratings play crucial roles, inflation does not seem to have a significant impact on green bond issuance. Our results remain robust through sensitivity tests and endogeneity analyses. Developed countries primarily rely on central bank monitoring and enforcement intensity as the dominant policy variable, whereas developing countries lean more towards the central bank mandate as the influential policy variable. © 2024 Elsevier B.V.

Keywords Central bank policies, Global, Green bond issuance, Institutions