A critical review of the impact of uncertainties on green bonds

Abstract

Green bonds are relatively new in the financial market compared to other financial securities but are useful in financing environmentally friendly projects. Just like other financial securities, green bonds are affected by various factors, such as economic policy uncertainty. Our aim of this paper was to conduct a systematic literature review of the impact of economic policy uncertainty on green bonds. We sought to do a thorough analysis of the existing literature on the assessment of the impact of economic policy uncertainty on green bonds and the techniques used in assessing the impact. Our findings showed that economic policy uncertainty had a strong impact on the green bond, with its intensity varying by location. This impact tended to be more pronounced in periods of heightened uncertainty. Also, our findings highlighted that the assessment of the impact of economic policy uncertainty on green bonds gained popularity in 2019, with China emerging as a prominent contributor. However, other countries, such as Finland, even though they had few published papers, their citations signified the production of quality papers in this field. Additionally, we found that the application of the quantile analysis method was utilized by many recent studies, which signified its importance in this field. Our findings highlighted the importance of considering appropriate techniques in assessing the impact of economic policy uncertainty on green bonds while taking into account the paper quality.

Keywords

• economic policy uncertainty
• financial securities
• environmental
• social and government (esg) bonds
• environmental finance
• climate bonds
• sustainable development goals