Motivations For Green Bond Issuance And “green Incentives??

In recent years,the Chinese government has attached great importance to green development and climate change.As President Xi Jinping announced to the world at the Climate Ambition Summit 2020 that China will achieve “carbon peak” in 2030 and“carbon neutral” in 2060.Ambitious goals have transferred our country’s green development and environmental governance from an abstract spiritual guide to a strict quantitative goal.According to the statistics of the existing literature,the national government have provided a large amount of funding for China’s green industry,but the investment funding gap for green projects is still huge.Therefore,the current funding gap for green projects in my country is mainly due to the lack of social capital.Currently,the largest green financial market in China is the green bond market.The existing literature on green bonds currently focuses on the financing characteristics of green bonds,the pricing characteristics of the green bond secondary market,liquidity,risks and so on.However,research on green bond issuance mechanism,issuance motives,and the most direct “green” incentives and environmental incentives for green bond financing are still at the theoretical level,and few empirical studies have focused on the relevant incentive mechanisms of green bond policies and cared about green bonds issued by relevant characteristics of bond issuers.Focusing on the gap of research on the green bond policy incentive mechanism in the existing literature,this dissertation will conduct an in-depth discussion on my country’s green bond policy incentive mechanism by studying the incentive of green bond issuance and “green”effects.To test the incentive mechanism of my country’s green bond policy,this dissertation discusses the incentive mechanism of green bonds for issuers compared with ordinary bonds from two aspects: theoretical and empirical ways.First of all,this article studies whether there is an incentive mechanism in terms of financing costs for green bonds.The research mainly discusses from two perspectives: theoretical modeling and empirical analysis.From the perspective of theoretical research,this article expands the setting of the company’s dynamic capital structure model proposed by Leland(1994),by adding the environmental hazard expenditures in the production process,and setting that the investment of green bonds into funds can reduce environmental hazards.Through three perspectives of optimization solution,comparative static analysis and numerical simulation analysis,it is demonstrated that in an equilibrium state,green bond issuance can effectively reduce the overall debt financing cost of bond issuers.From the empirical research,this paper collects three-year green bond issuance data from 2016 to 2018.On the basis of distinguishing the two major types of green bond issuers,entity companies and commercial banks,the issuance cost of green bonds and non-green bonds is empirically studied.Considering that the financing cost of corporate bonds is affected by the money market,this dissertation uses the Nelson-Siegel model to construct each sample bond issue date,which has the same maturity.The yield to maturity of the treasury bonds is regarded as the risk-free yield,and the credit spread of each credit bond(green bond and nongreen bond)is finally constructed as the research object.On controlling other factors,the comparative study on the issuance cost of green bonds and non-green bonds indicates that there is truly a financing cost discount for the issuance of green bonds by non-financial companies,while there is no financing cost discount for the issuance of green bonds by commercial banks.Therefore,China’s green bond issuance does have partial financing cost incentives for non-financial companies.Then,based on the empirical results that banks do not have the advantages of financing cost,this dissertation further introduces the mechanism of regulatory arbitrage for the motivation of banks to issue green bonds.This dissertation indicates that Chinese commercial banks have been under very strict risk supervision indicators in recent years,and the shadow banking business has been severely restricted.Currently,the conditions for commercial banks to issue financial bonds for financing are also very strict.For commercial banks with lower asset liquidity,it is even more difficult for them to find new financing channels to supplement their current assets.The policies for issuance of green bonds provide these commercial banks with opportunities for regulatory arbitrage.Therefore,this dissertation puts forward the hypothesis of “regulatory arbitrage” based on the abovementioned policy background for the issuance of green bonds by commercial banks.To test the motivation of commercial banks for regulatory arbitrage through the issuance of green financial bonds,this dissertation uses commercial banks’ asset liquidity indicators to empirically test the probability and amount of green financial bonds issued by commercial banks.To alleviate the endogenous problem caused by sample selection bias,this paper uses the Bi Probit model to conduct an empirical analysis on the probability of commercial banks issuing green financial bonds,and uses a combination of threshold regression and Heckman model to evaluate the scale of green bond issuance by commercial banks.The empirical results show that the less asset liquidity commercial banks are more likely to conduct regulatory arbitrage by issuing green financial bonds.Considering the impact of green loan demand on the issuance of green financial bonds of commercial banks,this dissertation manually collects the specific data of the “green credit plan” in the green bond offering circulars of all green financial bonds as a proxy variable representing the green credit demand of commercial banks.The empirical results show that the green credit demand of commercial banks can effectively affect the green financial bond issuance scale of commercial banks,but after controlling the green credit demand of commercial banks,the regulatory arbitrage effect of commercial banks still exists.Therefore,there is no incentive for financing costs for commercial banks to issue green financial bonds,and there is an incentive for regulatory arbitrage for banks.Finally,this dissertation studies the effects of the green bond issuance on the natural environment by testing the environmental scores before and after the green bond issuance.For non-financial companies with the discounted financing costs,this dissertation will continue to discuss in depth their environmental incentive mechanisms.This dissertation collects the green bond issuance status of all listed entities from 2016 to2018,the environmental performance score data in the ESG index and the corresponding financial indicators,and conducts an empirical study on the green bond issuance results of listed entities.The empirical results show that China’s green bond issuance policy does have effective environmental incentives for non-financial companies,and it is evident from both short-term and medium-to long-term perspectives.In order to obtain the above conclusions,this dissertation uses the Bi Probit model and Heckman model in the regression to alleviate the endogenous problem caused by sample selection bias,and uses various explanatory variables of bond issuance as the control variables for empirical research.In the short term,there is a significantly positive correlation between the probability of a non-financial company issuing green bonds and the company’s environmental performance.In other words,most non-financial companies that successfully issue green bonds have good environmental performance.The higher the environmental performance,larger-scale green debt financing the nonfinancial companies can obtain.In the medium and long term,China’s green bond issuance policy also has an environmental supervision mechanism for the issuers of green bonds,which prompts the issuers to continue to improve their environmental performance after the issuance of green bonds.Specifically,listed companies that successfully issued green bonds have a significantly higher increase in environmental performance after one year than listed companies that have not issued green bonds.In the second and third years,environmental performance is still rising,but environmental incentives began to weaken year by year.Furthermore,for listed companies that have issued green bonds,the larger the scale of green bond financing,the more obvious the increase in environmental performance,but the effect will also decrease as the number of years passes.Therefore,China’s green bond issuance policy not only provides incentives for financing costs for entity companies,but also provides environmental incentives before and after the issuance of green bonds.Finally,this dissertation conducts further research on the motivations of commercial banks’ issuance of green financial bonds,and further explores the real reasons why commercial banks still issue a large number of green bonds for debt financing without a financing cost incentive mechanism.This dissertation systematically studies the incentive mechanism of China’s green bond policy for two types of green bond issuers,and points out that China’s green bond policy has better financing cost incentives and environmental incentives for entity enterprises,but for commercial banks,financing cost incentives does not exist.The green bond issuance policy will also provide commercial banks with opportunities for regulatory arbitrage.The research results of this dissertation provide detailed factual basis for the further improvement of the current green bond issuance policy,and provide a certain direction for the reform of the green bond market in the next step.First,it is necessary to encourage entity companies to directly issue green bonds for green project financing,and commercial banks must switch from fund intermediary to information intermediary as soon as possible to provide green bond issuance guidance for entity companies;second,it is necessary to standardize the professional system of green certification.As far as possible,scientific and technological green certification agencies shall be introduced for green certification to avoid the issuer’s "greenwashing" motivation.