GREEN BOND: A WAY TO SAVE HUMANITY THROUGH MAKING AN AWARENESS REGARDING CLIMATE CHANGE

Abstract

This paper explores the potential of green bonds to mobilise adaptation and mitigation finance in developing countries. It discusses the main drivers of the green bond market in recent years and the barriers preventing developing countries from seizing it, on the basis of a theoretical approach. The results indicate that green bond growth is a reality in both developed and developing countries, backed by increasing environmental consciousness among investors. Nonetheless, demand remains incipient in developed countries and its full capacity seems to be undervalued. The lack of appropriate institutional mechanisms to deal with green bonds, the question of a minimum size and the high transaction costs associated with the issuance of green bonds are main obstacles to the growth of green bonds in developing countries. This paper suggests the effective use of multilateral and national development banks as intermediary institutions for local green bond management in order to resolve these challenges. In addition, municipal governments are expected to give local green bond issuers guarantees to offset the borrowing costs associated with issuing green bonds.