Green bond and Green halo: Difference between pages
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''Sustainability - sustainable finance - pricing - cost of capital - halo effect.'' | |||
A green halo is a theoretical benefit enjoyed by an organisation or sector from green activity or signalling, outside the immediate scope of the activity itself. | |||
For example, benefits resulting from related reputational improvements. | |||
Green | :<span style="color:#4B0082">'''''Green halo might lead to lower cost of capital for green bond issuers'''''</span> | ||
:"...green bonds may provide additional indirect benefits for the issuer. | |||
:For instance, by highlighting the environmental credentials of an issuer, green bonds offer a marketing benefit, potentially lowering the firm’s cost of capital by attracting new investors, or potentially improving business performance by attracting new customers. | |||
:This hypothesized indirect effect is called the green halo... | |||
:The argument for issuing green bonds to capture a green halo can be situated within the theoretical context of signaling problems. | |||
:Firms possess asymmetric information about their environmental credentials, such as future plans to reduce emissions. If this information is not or cannot be communicated effectively to investors with a preference for sustainability, firms may suffer from suboptimal costs of capital. | |||
:Issuing a green bond may serve as a (potentially costly) solution to address the signaling problem and achieve a more optimal capital cost." | |||
:''The Green Corporate Bond Issuance Premium - International Finance Discussion Papers 1346 - Board of Governors of the Federal Reserve System - 2022, p7-8.'' | |||
== See also == | == See also == | ||
* [[ | * [[Asymmetric information]] | ||
* [[ | * [[Bond]] | ||
* [[ | * [[Cost of capital]] | ||
* [[ | * [[Emissions]] | ||
* [[Green | * [[Federal Reserve System]] | ||
* [[Green | * [[Green]] | ||
* [[ | * [[Green bond]] | ||
* [[ | * [[Green curve]] | ||
* [[ | * [[Green gilt]] | ||
* [[Sustainability | * [[Greenium]] | ||
* [[Halo effect]] | |||
* [[Issuance]] | |||
* [[Issuer]] | |||
* [[Optimal capital structure]] | |||
* [[Premium]] | |||
* [[Reputational risk]] | |||
* [[Signalling]] | |||
* [[Sustainability]] | |||
* [[Sustainable finance]] | |||
==External link== | |||
*[https://www.federalreserve.gov/econres/ifdp/the-green-corporate-bond-issuance-premium.htm Caramichael, John and Andreas Rapp (2022) - "The Green Corporate Bond Issuance Premium," International Finance Discussion Papers 1346. Washington: Board of Governors of the Federal Reserve System] | |||
[ | |||
[[Category: | [[Category:Accounting,_tax_and_regulation]] | ||
[[Category: | [[Category:The_business_context]] | ||
[[Category:Ethics]] | |||
[[Category:Identify_and_assess_risks]] | |||
[[Category:Manage_risks]] | |||
[[Category:Risk_frameworks]] | |||
[[Category:Risk_reporting]] | |||
[[Category:Financial_products_and_markets]] |
Revision as of 20:54, 3 January 2023
Sustainability - sustainable finance - pricing - cost of capital - halo effect.
A green halo is a theoretical benefit enjoyed by an organisation or sector from green activity or signalling, outside the immediate scope of the activity itself.
For example, benefits resulting from related reputational improvements.
- Green halo might lead to lower cost of capital for green bond issuers
- "...green bonds may provide additional indirect benefits for the issuer.
- For instance, by highlighting the environmental credentials of an issuer, green bonds offer a marketing benefit, potentially lowering the firm’s cost of capital by attracting new investors, or potentially improving business performance by attracting new customers.
- This hypothesized indirect effect is called the green halo...
- The argument for issuing green bonds to capture a green halo can be situated within the theoretical context of signaling problems.
- Firms possess asymmetric information about their environmental credentials, such as future plans to reduce emissions. If this information is not or cannot be communicated effectively to investors with a preference for sustainability, firms may suffer from suboptimal costs of capital.
- Issuing a green bond may serve as a (potentially costly) solution to address the signaling problem and achieve a more optimal capital cost."
- The Green Corporate Bond Issuance Premium - International Finance Discussion Papers 1346 - Board of Governors of the Federal Reserve System - 2022, p7-8.
See also
- Asymmetric information
- Bond
- Cost of capital
- Emissions
- Federal Reserve System
- Green
- Green bond
- Green curve
- Green gilt
- Greenium
- Halo effect
- Issuance
- Issuer
- Optimal capital structure
- Premium
- Reputational risk
- Signalling
- Sustainability
- Sustainable finance