Green bonds - financial innovation for sustainability financing: The case of the Polish green bonds market and their development barriers

Abstract The struggle against climate change and the increasing implementation of sustainability and environmental, social and governance (ESG) standards have contributed to the dynamic development of green finance. Green bonds have become one of the key tools of green finance. The aim of this paper is to provide a comprehensive study related to the development and barriers of the green bonds market in Poland. A literature review, comparative analysis, and financial data were used in this research. The publication uses data from the Climate Bonds Initiative and includes global data on the development of the green bond market. The research was also enhanced by data from the Polish Ministry of Finance. Green bonds are an increasingly popular financing tool for renewable energy, zero-emission transport, or green buildings. The biggest advantages of green bonds are compliance with ESG standards, hedging of climate risk, and reputational benefits. Disadvantages include significant transaction costs, lack of uniform standardisation, or the risk of greenwashing – particularly when issuing sustainability-linked bonds. The development of green bonds in Poland faces barriers related to the lack of green projects. The development of municipal green bonds in Poland is clearly hampered by high transaction costs and the lack of clear economic benefits for issuers. Green bonds are not an instrument to finance all environmental investments, hence their implementation is limited; however, they are playing an increasingly important role in the transition towards sustainability.