Raising capital with purpose: challenges and opportunities in using corporate debt for environmental sustainability

Thesis

Through a set of four empirical chapters, this research provides insights into and understandings of corporate finance in relation to its environmental exposure and pricing in financial markets. After considering the nature of the relationship between stakeholders and the firm, as well as the nature of the power that these stakeholders possess, I decided to focus this thesis on the creditors.

In the first part of this thesis, therefore, I investigate the relationship between debt structures and environmental sustainability. The outcomes of the first study suggest that companies are sensitive to the cost of debt when deciding whether to invest in environmental sustainability projects. The outcome of the second study finds a negative association between the cost of debt and the environmental sustainability of a company, implying that firms with higher environmental sustainability scores are perceived as less risky and therefore awarded cheaper costs when issuing new debt. Drawing on these theoretical insights, the second part of the thesis is dedicated to the green bond market, a distinct debt security created to raise financing for environmental projects. The third study, therefore, focuses on the supply side of green bonds, identifying major drivers for their surge among developed and developing countries. Finally, having investigated the existence of the yield premium of green bonds, I found that the market appears to perceive green bonds issued later by the same issuer as riskier and with higher levels of yield spread over the government bonds compared with those issued earlier.

Authors: Chiesa, MA

• DOI: 10.5287/ora-amrazj9ya
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English
• Keywords: greenbond; green debt; green financing