Green bonds and non-financial value : a study of the Swedish green bond market

Abstract: Human-caused climate change in form of rising temperatures and sea-level rise are already being seen in many places. To avoid permanent effects on society the goal is to limit global temperature rise at two degrees Celsius above pre-industrial levels. In order to stop the increasing temperature rise, the financial sector has to allocate their funds into investments in renewable energy and sustainable projects that decrease direct impact on the climate. To solve for this, new instruments have been developed. One of these is the green bond. This study aims to investigate why investors are interested in green bonds and which green bonds they prefer. The values that can be obtained from green bonds is also studied, and what consequences the green bond investment give in relation to the investor´s sustainability strategy / profile. The empirical information is gathered through interviews with investors that currently hold green bonds in their portfolios and a green bond issuer. The empirical data is analyzed together with a theoretical background on CSR, CSV and Portfolio theory. The results of the study show that the main benefits from investing in green bonds are the high level of information that increases transparency. The transparency generates a better dialog between issuers and investors. Internal dialog regarding sustainability in the investing company is also increased due to the investment in green bonds. Another benefit is lower long-term risk due to compliance with possible regulations. The high level of information also let the investors know where their money goes and how they contribute to a more sustainable world. The conclusion of this study is that green bonds give equivalent return as conventional bonds while the information and transparency is higher. The values obtained from green bonds are better transparency, increased brand reputation and a higher demand for the investors’ products. Also, being proactive when it comes to possible regulations is a risk-minimizing factor.