Comment on “How Sovereign Sustainable Bond Issuance Shakes up the Corporate Sustainable Bond Market?: Evidence From Asian Markets”

Kim et al. (2026) contribute to the literature by providing evidence that sovereign sustainable bond issuance can lower corporate sustainable spreads through the reduction in greenium, using unique data from Asian markets that are currently under-researched in sustainable finance. Additionally, Kim et al. (2026) demonstrate how long it takes for the impacts of sovereign sustainable bond (SSB) issuance to be reflected in liquidity and yield spreads. In Equation (1), corporate green bond yield − corporate conventional bond yield is greenium, and corporate conventional bond yield − conventional sovereign bond yield is the risk premium. Kim et al. (2026) find that sovereign sustainable bond debuts have tightened yield spread via reductions in both greenium and the risk premium. As their second contribution, Kim et al. (2026) show that these reductions are statistically significant only in the short term, e.g., in daily data settings. In medium (monthly) and long-term (quarterly) data, the coefficient of impact on greenium is negative but not statistically significant. Regarding the impact on risk premiums, the coefficient is positive, although it is not statistically significant. These results suggest that signaling effects may be at play in the short term, which is consistent with the previous literature (Breuer et al. 2018; Wang et al. 2021; La Rosa and Bernini 2022). The issuance of a SSB implies that the government is promoting green policies. Investors may be more willing to invest in sustainable bonds, even if they sacrifice some financial returns. Although Kim et al. (2026) contribute significantly to the academic literature as mentioned previously, Kim et al. (2026) have some limitations and leave some space for future research. First, there are some inconsistencies between Tables 5 and 6 in Kim et al. (2026), although the decomposition of greenium and risk premium is their excellent contribution. Their Table 5 shows that the impact of the sovereign sustainable bond (SSB) debut on the yield spread is negative and statistically significant in monthly and quarterly data. However, the impact of SSB on the yield is not clear from their Table 6, as neither the medium-term nor the long-term data showed any results. This is partly because Kim et al. (2026) use different data to conduct the analysis presented in their tables 5 and 6. According to Table 2 in Kim et al. (2026), the sample sizes for bid-ask spread and yield spread are 160,139, whereas those of greenium and risk premium are 71,809 and 71,777, respectively. Even if no statistically significant results were found, the sums of the greenium and risk premium estimated from daily, monthly, and quarterly data were −0.0550, −0.0022, and −0.0360, respectively. We reasonably expect the impact of sovereign sustainable debt on the yield spread to be negative, but robust evidence should be provided in future research. Second, Kim et al. (2026) could consider how the impact of SSB issuance on the yield spread depends on the countries' prospects, such as different ESG practices (Stellner et al. 2015). For example, countries that issue more SSB have more negative impacts on the greenium. Additionally, the issuance of a sustainable sovereign bond is only one type of green policy. The overall ESG score of countries that proxy for proactive green policies might have an impact on the correlation between SSB issuance and the corporate greenium. Lastly, countries with proactive governance practices might have more substantial signaling effects. For example, Malaysia is renowned for its strong corporate governance practices (Do and Vo 2023). These analyses provide clearer insights into how one specific country's green policy affects the green bond markets. Third, it is interesting to consider how the behavior of institutional investors has an impact on the greenium. If sovereign green bonds are available, it is easier for them to hedge sustainable transition risks by constructing a portfolio that includes both sovereign sustainable bonds and corporate bonds issued in the same country. If institutional investors invest more in corporate sustainable bonds, they are likely to be a complement to, rather than a substitute for, sovereign sustainable bonds. Kim et al. (2026) provide partial evidence that SSB is a complement to corporate sustainable bonds, as SSB helps to expand the corporate sustainable bond. However, it is still meaningful to see how different institutional investors, such as banks, insurance companies, public pensions, private pensions, hedge funds, etc., invest in SSB or corporate green bonds differently, which provides meaningful insights into what kind of institutional investors are willing to invest in green bonds by sacrificing financial returns. Additionally, institutional investors' sustainability preferences are also influenced by the country's green policies or regulations (Barber et al. 2021). These channels are interesting hypotheses to test. Fourth, Kim et al. (2026) show that the first issue of SSB improves the liquidity and reduces the yield spreads. However, it is not entirely clear that the improvement in liquidity causes a reduction in yield spread due to the model implemented. In the regression analysis with the yield spread as the dependent variable, the lagged bid-ask spread is included as an independent variable, but the contemporaneous bid-ask spread is not included, as shown in Table 5 in Kim et al. (2026). It is not certain that the yield spread is correlated with the bid-ask spread. If Kim et al. (2026) had included the contemporaneous bid-ask spread, that would help. Ideally, if Kim et al. (2026) had conducted a two-stage model, the first stage would be a regression of bid-ask spread on SSB issuance and other control variables, and the second stage would be a regression of yield spreads on the estimated bid-ask spread and other control variables. If it shows significant results, the issuance of SSB reduces the yield spread by both greenium and the reduction in liquidity premium. In conclusion, although there are some limitations, Kim et al. (2026) make a significant contribution to the sustainable finance literature and practice by providing evidence that the issuance of SSBs has positive impacts on the overall corporate sustainable bond markets in Asia. I expect future research to provide insights into how each Asian country can benefit from the government's change in green policy.