Assessing the Impact of Sovereign Green Bonds on Energy Transition: A Staggered Difference-in-Difference Analysis

Abstract: An increasing number of governments are adopting the issuance of sovereign green bonds (SGBs) as part of their strategies for transitioning to renewable energy and achieving their net zero greenhouse gas emissions targets. However, due to the nascency of the SGB market, little empirical evidence of their effectiveness as drivers of energy transition exists. This thesis investigates the impact of SGB issuance on a country's energy mix and on corporate green bond (CGB) issuance volumes in the country of SGB issuance. First, I discuss the mechanisms through which SGB issuance could have a positive impact on environmental outcomes at a country level. I then provide an insight into the characteristics of SGBs and their issuers before analysing the effects of SGB issuance on renewable electricity share of total installed electricity capacity, and on CGB issuance volumes, using a staggered difference-in-difference event study approach. My results suggest that SGBs alone do not accelerate the transition to renewable energy or lead to higher issuance volumes of CGBs. However, SGBs may still provide value when employed as part of a wider decarbonization strategy, as promoters of other green initiatives being carried out by the issuing government.