Green bonds: Do investors benefit from third-party certification?

This study investigates whether green-bond certification benefits climate-risk-concerned investors. We compare the performance of green bonds and their degree of compliance with the Green Bond Principles and find that certification appears to play no role in bond performance—bonds with different certification tiers are indistinguishable from others. However, bond characteristics, such as issuer type and bond domicile, are significant factors in the review. We argue that, while review and certification might not have a visible impact on performance, firms may resort to the certification scheme to increase their attractiveness. Our paper highlights the need for a more robust classification system that allows investors to better differentiate green and conventional bonds.