Green Bonds: Greenwashing or Genuinely Green? A Study Based on Stock Mispricing

Abstract

The proposal of carbon neutrality has led to a significant growth in green bonds (GBs), sparking in turn widespread attention on whether these bonds are issued for genuinely green objectives or for greenwashing intentions. The extant research has not fully explored the greenwashing issue concerning GBs, particularly due to the controversies in the methods for identifying such practices. Following the outbreak of COVID-19, the global markets have seen a slowdown in the issuance of GBs, whereas China has experienced a surge in its GB market, emerging as the world's foremost issuer of GBs. In light of this economic reality and to address the research gap, this study draws on Chinese GBs as research objects and examines for the first time the issue of greenwashing in GBs through the lens of stock mispricing (SM). The results reveal that the issuance of GBs by companies significantly exacerbates SM, indicating the presence of greenwashing in Chinese GBs. Notably, the greenwashing issue is more pronounced when firms that issue GBs have political connections with the government and experience low financial risks. These findings not only enrich studies on greenwashing in GBs but also offer valuable insights for investors and regulators.