VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS AND BUSINESS FACULTY OF FINANCE AND BANKING GRADUATION THESIS IMPACT OF GREEN BOND ON RENEWABLE ENERGY TRANSITION Ha Noi, March 2023 VIETNAM NATIONAL UNIVERSITY UNIVERSITY OF ECONOMICS AND BUSINESS FACULTY OF FINANCE AND BANKING Supervisor: MSc. Luu Hanh Nguyen Student: Pham Thi Tra Anh Class: QH2019E TCNH CLC 4 ID Code: 19050613 DECLARATION I hereby declare that this thesis is my own work. Survey data, calculations and result in the thesis are truthful and have never been published by anyone in any other work and effort as well that it has not been submitted anywhere. Where other sources of information have been used, they have been acknowledged.
The reference to source material has been made citing and referencing in accordance with the faculty’s regulations. Supervisor’s Approval Student Hanoi, March 2023 Student Pham Thi Tra Anh ACKNOWLEDGEMENT First of all, I would like to express my sincere gratitude to our supervisor MA. Luu Hanh Nguyen for her support and instruction to help us complete the thesis successfully for 2 months. IfI do not have her as our supervisor, my thesis would be incredibly different.
I am not saying it would be bad - but we are sure that it cannot be successful as it is. | appreciate her extensive knowledge, enthusiasm, organization, and her dedication, it has meant so much to me. Besides, I also would like to show our respect and thankfulness to the all University of Economics and Business lecturers who have guided and passed on to me from the first days of entering the university. The knowledge acquired during the study process is not only the foundation for the thesis research process but also a valuable asset for me to step firmly and confidently into life.
Last but not least, I would like to extend my sincere thanks from the bottom of our hearts to family, and friends for treasured memories and loving support throughout my education and graduation. It would be challenging to complete the research without their motivation and inspiration. Wishing you all the best! The authors of this thesis TABLE OF CONTENTS LIST OF TABLE. con gnngHHHHRHRHRREEAREHEEEESESEEESESESESEEESESESESESSEESESSE 1 ABSTRACT.sksttHnHHHHHHHHHHHRHHHTHRHEEEEEEEHEEEEEESESHEEESESEEHEEEEESESEEEEESESSEE 2 CHAPTER 1: INTRODUCTTION.
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Descriptive of main variablÌ@S.1111111 24 CHAPTER 4: RESULTS AND DISCUSSION .--c-cckchH HH HH HH TH TH HH HH HH HH HH 27 4. HH HH Hà Hà HH HH HH HH H111 1p 29 CHAPTER 5: CONCLUSION.-< 55555 s‡sSsssEEHHH HH HH 32 REFERENCES. càng nhhghHRHREEEEEEEEEEEEEEEEEEEEEERERERERSESESESESESESESESEEESESEEE 33 LIST OF TABLE Table 3. 1: Description ofthe variables included in the regression modeÌs.
1: Descriptive StatÏSEÍCS. HH HH HH TH KH HH KH HT KH KH HH 26 Table 4.- ác tt tt nhàn Hàng HH Hà Hà tp phế tre nhikt 27 Table 4. 3: Reliability check table of baseline regression modelL. 31 ABSTRACT The impact of green bonds on renewable energy transition has been a topic ofinterest in recent years.
Green bonds are financial instruments used to finance environmentally friendly projects, including renewable energy. The issuance of green bonds has increased significantly in the past decade, with many investors seeking to invest in sustainable projects. The aim ofthis paper is to review the literature on the impact of green bonds on renewable energy transition. To determine this impact, the study collected data from 67 countries around the world on green bond issuance.
This study uses a regression model and panel data analysis. The results show that green bonds have a positive impact on the renewable energy transition, as they provide a new source of funding for renewable energy projects. Green bonds can also reduce the cost of capital for renewable energy projects and provide a new avenue for investors to invest in sustainable projects. The evidence suggests that the application of green bonds can increase the deployment of renewable energy projects and contribute to the decarbonization of the energy sector.
Overall, this paper highlights the impact of green bonds on the renewable energy transition. Keyword: Green bond, Renewable Energy, Sustainable development. Urgency of the topic Continuous climatic and environmental shocks over the past ten years have forced our society to move faster toward more sustainable growth and, ultimately, a green economy with no pollution. As the globe strives to solve these pressing climate change and clean energy concerns while simultaneously recovering from the ongoing COVID-19 epidemic, sustainable finance is surging in favor across global markets to financially support the green shift (Vu, 2021).
The European Green Deal's policy goals and the EU's international obligations to climate and sustainability goals both depend heavily on sustainable finance. The European Green Deal is a comprehensive plan proposed by the European Commission to make the European Union climate-neutral by 2050 and transform it into a sustainable, green economy. To achieve these goals, the plan recognizes the need for significant investments in sustainable initiatives and the mobilization of private finance to supplement public funding.As a supplement to state funding, it does this through directing private investment toward the shift to a resource-efficient, equitable, climate-neutral, and resilient economy. Investing in a resilient economy and a long-term recovery from the COVID-19 pandemic's effects will be supported by sustainable funding, it will be ensured.
The European Union has been in the forefront of initiatives to create a financial system that promotes sustainable growth and has expressed its strong support for the transition to a low-carbon, more resource-efficient, and sustainable economy. (Elkerbout et al., 2020) Sustainable finance plays a crucial role in supporting the transition to a resource- efficient, equitable, climate-neutral, and resilient economy. It involves directing private investment toward sustainable initiatives, such as renewable energy, sustainable infrastructure, and green technologies. This can help create new economic opportunities, support job creation, and drive innovation while contributing to the overall transition to a sustainable economy.
The European Union has been at the forefront of initiatives to create a financial system that promotes sustainable growth and has expressed strong support for the transition to a low-carbon, resource-efficient, and sustainable economy. This includes measures to integrate environmental, social, and governance (ESG) factors into financial decision-making and promote sustainable investments. The lack of finance is one of the biggest obstacles to solving environmental and climate problems. The scale of the challenge is enormous and requires significant investment in new technologies, infrastructure, and programs.
This has led to an increasing interest in green bonds as a means of meeting this financial need. Green bonds are a type of bond that is issued specifically to finance environmentally friendly projects. The proceeds from the bond sale are earmarked for these projects, which can include renewable energy, energy efficiency, and sustainable agriculture, among others. By investing in green bonds, investors can support the transition to a more sustainable economy while also generating returns on their investments.
Green bonds have the potential to unlock significant amounts of capital and provide a much- needed boost to the efforts to address climate change and other environmental issues. Green bonds are defined as any type of bonds where “the proceeds will be exclusively used to finance or re-finance, in part or in full, new and/or existing eligible green projects” (ICMA, 2017: 2f), that is, environmentally- or climate-friendly projects, such as renewable energy, green buildings, clean transportation, sustainable waste man agement, sustainable land use, biodiversity and clean water. With green bonds, the issuer obtains the capital to finance green projects, while the investors receive fixed income in the form of interest. At maturity, the principal is repaid, unless the issuer goes bankrupt.
Green bonds in this way are the same as any corporate bond, but they are labeled “green” because the issuer pledges to use the proceeds for environmentally friendly or climate-focused projects in accordance with sustainability standards. In January 2014, the International Capital Markets Association published the Green Bond Principles to establish rules for a bond to be labeled as green. The distinction between labeled and unlabeled bonds laid out in the Green Bond Principles paves the way for the extraordinary growth in the issuance of green bonds from 3bn USD in 2012 to 81bn USD in 2016 (Reboredo, 2018). The explosive growth of the green bond market has led Morgan Stanley to describe it as “green bond boom” (Morgan, 2017).
The characteristics of green bonds are not just limited to the “green” aspect which is directly linked to promoting and implementing green development initiatives, but also include the government's responsibility to accelerate climate actions and create geopolitical situations that are favorable to green deals. As emphasized by Agliardi and Agliardi (2019), the development of green bonds depends on building investor confidence in the green bond market and enhancing the understanding of green bonds' characteristics, which are closely associated with regulatory changes and green policies. In Kidney & Oliver's (2020) research, green bond is like a regular bond but is issued to support investments, aimed at reducing environmental impacts such as reducing climate change or increasing energy efficiency (Falsen and Johansson, 2015). According to G20 Green Finance (2016), green bonds are classified as distinguished from ordinary bonds by the commitment to use the mobilized capital to finance or refinance green projects or businesses.
Green bonds are issued by entities such as the Government, local authorities, or the private sector such as banks and businesses to raise capital for projects associated with the environment. Green bonds, according to Bloomberg, provide financial assurance for initiatives that aim to reduce the effects of greenhouse gas (GHG) emissions. The money raised from green bonds will be used to fund cutting-edge initiatives that will lessen the negative consequences of global industrialisation. The world needs to employ cash for its most beneficial purposes.
For society to develop and the quality of life to improve, resources must be used effectively. The financial sector must comprehend how the SDGs alter the dynamics of the global economy, and this calls for the development of novel financial instruments to raise money for green initiatives (Gianfrate and Peri, 2019). The utilization of green bonds revenues for green technology is theoretical. These technologies are frequently referred to as green initiatives.
These initiatives are mostly in their infancy and are not yet financially feasible (Sachs et al. Green bonds are distinct from other traditional (brown) bonds in this way. According to Taghizadeh-Hesary and Yoshino (2020), the latter is frequently employed to fund conventional initiatives that are more financially feasible. The return on investments in green initiatives is less definite than it is for standard projects, which makes them riskier.
As a result, there is a large disparity between the funding requirements and the financing options for green projects. Green bonds are tools that can assist bridge the financial gap between demand and supply and slow down environmental damage. According to the European Commission (2016), green bonds concentrate mainly on finance waste and pollution projects (5.6%), low-carbon transportation projects (13.4%), sustainable water projects (9.3%), and renewable energy projects (45.8% of the bonds that were issued in 2015). Private sector (business) enterprises, public sector (national, municipal, or state entities), and international organizations (such the World Bank, the European Investment Bank, etc.) all issue green bonds.
The overwhelming majority of green bond issuances (approximately 80%) are conducted in USD and EUR, with a 5-10 year 5 average development.