What are the barriers and incentives of the green bond market development ?

Abstract

This master thesis aims to point out the barriers and incentives of the green bond market development. To do so, a qualitative research has been conducted to get experiences directly from the field, among a sample of professionals active in the green finance sector. These professionals gather investors, issuers and other market intermediaries like stock exchanges, second party opinion providers, as well as members of key players of the green bond market like the CBI or ICMA.

The most cited barriers during the conduct of interviews were: the lack of standardisation in green bond definitions, guidelines and methodologies, the lack of attractability of green bonds compared to traditional bonds, the high costs related to green bond issuance, the lack of eligible green projects supply, the lack of comparability among green projects and green bonds and the asymmetry between the green bond demand and supply.

The results concerning incentives during the conduct of the investigation were more scattered and have been accordingly classified into four purposes: standardisation, the rise of awareness on the market and development of communication networks, the stimulation of green projects supply, and finally incentives for issuers. Once again, a majority of participants in this research outlined that measures ought to be taken to standardise the market.

In addition, a small majority of interviewees favoured the possibility of green bonds going mainstream alongside the conventional bonds in the very distant future (20-30 years). This vision involves evaluation criteria not only considering financial features of bonds, but also taking into account factors like environmental impact and sustainability.

Keywords: green bonds, green finance, sustainability, ESG, sustainable development, low-carbon transition.