On the legal foundations of green bonds

This paper presents one of the first systematic analyses of the legal foundations of green bond issuance. We find that French and Scandinavian civil law origins are positively associated with green bond issuance, whereas English common law origin is negatively associated. These results are robust across alternative measures of green bond issuance, and two quasi-natural experiments. We further show that stronger creditor-rights protection (consistent with stakeholder theory) significantly enhances green bond issuance, while greater financial liberalization (consistent with financial liberalization theory) significantly reduces it. Finally, we find that the positive impact of green bond issuance on renewable energy generation and environmental project financing is stronger under French, Scandinavian, and German civil law origins, and weaker under English common law. Taken together, these findings contribute to debates on firms' ethical responsibilities in addressing climate change and carbon dioxide emissions, and highlight the critical role of legal systems in financing the climate transition.