A critical review of the impact of uncertainties on green bonds

Samuel Asante Gyamerah; Clement Asare; Samuel Asante Gyamerah; Clement Asare

doi:10.3934/GF.2024004

Green Finance

2024, Volume 6, Issue 1: 78-91. doi: 10.3934/GF.2024004

Previous Article Next Article

Mini review Special Issues

A critical review of the impact of uncertainties on green bonds

Samuel Asante Gyamerah ^{1,2
,
,},
Clement Asare ²

1.
Department of Mathematics and Statistics, University of Waterloo, Canada
2.
Department of Mathematics and Statistics, Kwame Nkrumah University of Science and Technology, Ghana

Received: 14 October 2023 Revised: 20 January 2024 Accepted: 18 February 2024 Published: 27 February 2024
JEL Codes: G15, G32

Green bonds are relatively new in the financial market compared to other financial securities but are useful in financing environmentally friendly projects. Just like other financial securities, green bonds are affected by various factors, such as economic policy uncertainty. Our aim of this paper was to conduct a systematic literature review of the impact of economic policy uncertainty on green bonds. We sought to do a thorough analysis of the existing literature on the assessment of the impact of economic policy uncertainty on green bonds and the techniques used in assessing the impact. Our findings showed that economic policy uncertainty had a strong impact on the green bond, with its intensity varying by location. This impact tended to be more pronounced in periods of heightened uncertainty. Also, our findings highlighted that the assessment of the impact of economic policy uncertainty on green bonds gained popularity in 2019, with China emerging as a prominent contributor. However, other countries, such as Finland, even though they had few published papers, their citations signified the production of quality papers in this field. Additionally, we found that the application of the quantile analysis method was utilized by many recent studies, which signified its importance in this field. Our findings highlighted the importance of considering appropriate techniques in assessing the impact of economic policy uncertainty on green bonds while taking into account the paper quality.
- economic policy uncertainty,
- financial securities,
- environmental,
- social and government (ESG) bonds,
- environmental finance,
- climate bonds,
- sustainable development goals
Citation: Samuel Asante Gyamerah, Clement Asare. A critical review of the impact of uncertainties on green bonds[J]. Green Finance, 2024, 6(1): 78-91. doi: 10.3934/GF.2024004

Related Papers:

Abstract

Green bonds are relatively new in the financial market compared to other financial securities but are useful in financing environmentally friendly projects. Just like other financial securities, green bonds are affected by various factors, such as economic policy uncertainty. Our aim of this paper was to conduct a systematic literature review of the impact of economic policy uncertainty on green bonds. We sought to do a thorough analysis of the existing literature on the assessment of the impact of economic policy uncertainty on green bonds and the techniques used in assessing the impact. Our findings showed that economic policy uncertainty had a strong impact on the green bond, with its intensity varying by location. This impact tended to be more pronounced in periods of heightened uncertainty. Also, our findings highlighted that the assessment of the impact of economic policy uncertainty on green bonds gained popularity in 2019, with China emerging as a prominent contributor. However, other countries, such as Finland, even though they had few published papers, their citations signified the production of quality papers in this field. Additionally, we found that the application of the quantile analysis method was utilized by many recent studies, which signified its importance in this field. Our findings highlighted the importance of considering appropriate techniques in assessing the impact of economic policy uncertainty on green bonds while taking into account the paper quality.

References

[1]	Anh Tu C, Sarker T, Rasoulinezhad E (2020) Factors Influencing the Green Bond Market Expansion: Evidence from a Multi-Dimensional Analysis. J Risk Financ Manage 13: 126. https://doi.org/10.3390/jrfm13060126 doi: 10.3390/jrfm13060126
[2]	Baker M, Bergstresser D, Serafeim G, et al. (2018) Financing the Response to Climate Change: The Pricing and Ownership of U.S. Green Bonds. Natl Bureau Econ Res https://doi.org/10.3386/w25194 doi: 10.3386/w25194
[3]	Broadstock DC, Cheng LTW (2019) Time-varying relation between black and green bond price benchmarks: Macroeconomic determinants for the first decade. Financ Res Lett 29: 17–22. https://doi.org/10.1016/j.frl.2019.02.006 doi: 10.1016/j.frl.2019.02.006
[4]	Chakrabarti P, Jawed MS, Sarkhel M (2021). COVID-19 pandemic and global financial market interlinkages: a dynamic temporal network analysis. Appl Econ 53: 2930–2945. https://doi.org/10.1080/00036846.2020.1870654 doi: 10.1080/00036846.2020.1870654
[5]	Denyer D, Tranfield D (2009) Producing a systematic review. The Sage handbook of organizational research methods, 671–689.
[6]	Doğan B, Trabelsi N, Tiwari AK, et al. (2023) Dynamic dependence and causality between crude oil, green bonds, commodities, geopolitical risks, and policy uncertainty. Q Rev Econ Financ 89: 36–62. https://doi.org/10.1016/j.qref.2023.02.006 doi: 10.1016/j.qref.2023.02.006
[7]	Dong X, Xiong Y, Nie S, et al. (2023) Can bonds hedge stock market risks? Green bonds vs conventional bonds. Financ Res Lett 52: 103367. https://doi.org/10.1016/j.frl.2022.103367 doi: 10.1016/j.frl.2022.103367
[8]	Gök R (2023) Ukrayna İşgali Döneminde Jeopolitik Risk ve Ekonomik Belirsizliğin Yeşil Tahvil Piyasası Üzerindeki Nedensellik Etkileri. In Finansal Piyasaların Evrimi: Bankacılık, Risk Yönetimi, Piyasa ve Kurumlar. Özgür Yayınları. https://doi.org/10.58830/ozgur.pub67.c175
[9]	Gyamerah SA, Asare C, Mintah D, et al. (2023) Exploring the optimal climate conditions for a maximum maize production in Ghana: Implications for food security. Smart Agr Technol 6: 100370. https://doi.org/10.1016/j.atech.2023.100370 doi: 10.1016/j.atech.2023.100370
[10]	Hannan MT, Tuma NB (1979) Methods for Temporal Analysis. Ann Rev Sociol 5: 303–328. https://doi.org/10.1146/annurev.so.05.080179.001511 doi: 10.1146/annurev.so.05.080179.001511
[11]	Haq IU, Chupradit S, Huo C (2021) Do Green Bonds Act as a Hedge or a Safe Haven against Economic Policy Uncertainty? Evidence from the USA and China. Int J Financ Stud 9: 40. https://doi.org/10.3390/ijfs9030040 doi: 10.3390/ijfs9030040
[12]	Kocaarslan B, Soytas U (2023) The role of major markets in predicting the U.S. municipal green bond market performance: New evidence from machine learning models. Technol Forecast Soc Change 196: 122820. https://doi.org/10.1016/j.techfore.2023.122820 doi: 10.1016/j.techfore.2023.122820
[13]	Li H, Li Q, Huang X, et al. (2023) Do green bonds and economic policy uncertainty matter for carbon price? New insights from a TVP-VAR framework. Int Rev Financ Anal 86: 102502. https://doi.org/10.1016/j.irfa.2023.102502 doi: 10.1016/j.irfa.2023.102502
[14]	Lin B, Su T (2023) Uncertainties and green bond markets: Evidence from tail dependence. Int J Finan Econ 28: 4458–4475. https://doi.org/10.1002/ijfe.2659 doi: 10.1002/ijfe.2659
[15]	Pham L, Nguyen CP (2022) How do stock, oil, and economic policy uncertainty influence the green bond market? Financ Res Lett 45: 102128. https://doi.org/10.1016/j.frl.2021.102128 doi: 10.1016/j.frl.2021.102128
[16]	Samuel MT (2023) The Israel‐Hamas War: Historical Context and International Law. Middle East Policy. https://doi.org/10.1111/mepo.12723 doi: 10.1111/mepo.12723
[17]	Statista (2023) Value of green bonds issued in selected countries worldwide 2022. Available from: https://www.statista.com/statistics/1289016/green-bonds-issued-worldwide-by.
[18]	Syed AA, Ahmed F, Kamal MA, et al. (2022) Is There an Asymmetric Relationship between Economic Policy Uncertainty, Cryptocurrencies, and Global Green Bonds? Evidence from the United States of America. Mathematics 10: 720. https://doi.org/10.3390/math10050720 doi: 10.3390/math10050720
[19]	Szulczewski ML, MacMinn CW, Herzog HJ, et al. (2012) Lifetime of carbon capture and storage as a climate-change mitigation technology. P Natl Acad Sci 109: 5185–5189. https://doi.org/10.1073/pnas.1115347109 doi: 10.1073/pnas.1115347109
[20]	Tang Y, Chen XH, Sarker PK, et al. (2023) Asymmetric effects of geopolitical risks and uncertainties on green bond markets. Technol Forecast Soc Change 189: 122348. https://doi.org/10.1016/j.techfore.2023.122348 doi: 10.1016/j.techfore.2023.122348
[21]	Tian H, Long S, Li Z (2022) Asymmetric effects of climate policy uncertainty, infectious diseases-related uncertainty, crude oil volatility, and geopolitical risks on green bond prices. Financ Res Lett 48: 103008. https://doi.org/10.1016/j.frl.2022.103008 doi: 10.1016/j.frl.2022.103008
[22]	Wang KH, Wang ZS (2023) What affects China's green finance? Evidence from cryptocurrency market, oil market, and economic policy uncertainty. Environ Sci Pollut Res 30: 93227–93241. https://doi.org/10.1007/s11356-023-28953-4 doi: 10.1007/s11356-023-28953-4
[23]	Wang X, Li J, Ren X (2022) Asymmetric causality of economic policy uncertainty and oil volatility index on time-varying nexus of the clean energy, carbon and green bond. Int Rev Financ Anal 83: 102306. https://doi.org/10.1016/j.irfa.2022.102306 doi: 10.1016/j.irfa.2022.102306
[24]	Weber O, Saravade V (2019) Green bonds: current development and their future.
[25]	Wei P, Qi Y, Ren X, et al. (2022) Does Economic Policy Uncertainty Affect Green Bond Markets? Evidence from Wavelet-Based Quantile Analysis. Emerg Mark Financ Tr 58: 4375–4388. https://doi.org/10.1080/1540496X.2022.2069487 doi: 10.1080/1540496X.2022.2069487
[26]	Wei P, Zhou J, Ren X (2021) The Roles of Economic Policy Uncertainty in Green Bond Market Efficiency: Evidence From QARDL Approach. SSRN 3989911.
[27]	World Bank (2019) Green bond Impact report (2019th ed.).
[28]	World Energy Outlook (2012) – Analysis - IEA. (n.d.). IEA. Available from: https://www.iea.org/reports/world-energy-outlook-2012.
[29]	Xia Y, Shi Z, Du X, et al. (2023) Can green assets hedge against economic policy uncertainty? Evidence from China with portfolio implications. Financ Res Lett 55: 103874. https://doi.org/10.1016/j.frl.2023.103874 doi: 10.1016/j.frl.2023.103874
[30]	Yi Y, Zhang Z, Yan Y (2021) Kindness is rewarded! The impact of corporate social responsibility on Chinese market reactions to the COVID-19 pandemic. Econ Lett 208: 110066. https://doi.org/10.1016/j.econlet.2021.110066 doi: 10.1016/j.econlet.2021.110066

Reader Comments

Your name:*

Email:*
© 2024 the Author(s), licensee AIMS Press. This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0)