Bank for International Settlements research finds stricter emissions policies drive green bond growth and signal lower corporate emissions

The Bank for International Settlements published research assessing whether tougher public policies to curb greenhouse gas (GHG) emissions have supported the development of green bond markets and whether issuing green bonds is associated with later emissions reductions. The article finds that green bond markets have expanded most in jurisdictions with more stringent emissions policies, and that firms’ initial green bond issuance is followed by lower emissions intensity, especially among heavy emitters in carbon-intensive sectors. The study documents rapid market growth, with green bonds outstanding nearing USD 3 trillion in 2024 (up from roughly USD 500 billion in 2018) and annual issuance reaching USD 700 billion in 2024, with issuance spanning sovereigns, municipalities, financial institutions and corporates. Using a 39-country panel from 2011–22, a one standard deviation increase in overall climate policy stringency is associated with around 2.4% higher annual green bond issuance, while the relationship is stronger for sector-specific mitigation policies at nearly 3%. Firm-level analysis for 736 issuers (2011–22) links first-time green bond issuance to a statistically significant drop in subsequent GHG emissions intensity, including an average decline of around 21% one year after initial issuance, with the reductions concentrated among firms in carbon-intensive sectors and those with high pre-issuance emissions intensity. Looking ahead, the article flags the question of whether adding explicit, binding issuer-level emissions constraints to green bonds could attract additional demand and reduce funding costs for investments in more sustainable activities.