Bank green transition or greenwashing? How truly green are perceived the projects financed by green bonds issued by European banks?

Banks play a pivotal role in supporting the real economy throughout the transition toward a more environmentally sustainable model. Among the initiatives available to them, the issuance of green bonds represents a concrete means of demonstrating a commitment to sustainable finance. However, for such initiatives to be credible, banks must ensure that green bond issuance translates into measurable and timely improvements in their environmental performance. This research stems from the skepticism around banks issuing green bonds, as a result of which they may not benefit from a greenium (a premium on the yield of green bonds in favor of the issuer), perhaps because they are not perceived by investors as reliable in implementing green projects. Consequently, investors may perceive the “environmental benefit” and allocation of bond proceeds as less direct and transparent, and the impact of green bank bonds as reduced. The findings document that the ESG score (comprehensive and per pillar), the GHG Scope 1, Scope 2 and Scope 3 emissions, as well as the alignment with the climate related SDGs (SDG-7 and SDG-13) exert negative, statistically significant impact on the yield. In contrast, the green bond label and the number of SDGs have positive, statistically significant effect on bond yields. This indicates that the green bond label or the alignment with the SDGs that are not relevant to green projects do not convince investors to accept lower returns, whereas more specific or relevant indicators do.