Investigating the determinants of green bond issuance and its role in achieving the sustainable development goals

Abstract

Abstract

This study examines the determinants of green bond issuance across 24 European Union countries using panel data for the period 2018–2023. A country fixed-effects framework is employed to analyse within-country changes in green bond issuance and to reassess the roles of macroeconomic, environmental, fiscal and institutional factors, with particular attention to GDP per capita, ESG-related risk and fiscal balance. The results suggest that higher ESG-related risk and weaker fiscal positions may be associated with higher green bond issuance, while GDP per capita shows no robust effect. Further estimates distinguishing between sovereign and non-sovereign issuers reveal substantial heterogeneity across issuer types. ESG-related risk tends to be positively related to issuance in both segments, whereas fiscal conditions appear to be relevant for non-sovereign issuers, suggesting that the motivations for issuing green bonds differ between public and private market participants. The COVID-19 period is incorporated as an exogenous shock capturing a potential temporary disruption in issuance dynamics. Overall, the findings suggest a potentially important role for institutional risk and fiscal pressures, alongside traditional economic and environmental indicators, in explaining recent green bond issuance patterns in the European Union and provide new evidence on issuer-type heterogeneity in European green debt markets.