Key Drivers of Corporate Green Bond Growth in Europe: A Structural Equation Modeling Approach
Résumé
This paper explores the primary factors driving corporate green bond issuance growth across 19 European countries between 2013 and 2024, focusing on the influence of institutional quality, financial market dynamics, and regulatory frameworks. Using structural equation modeling (SEM), the study examines the complex interactions among these factors, offering a nuanced understanding of how green bond issuance is shaped. Findings reveal that institutional quality plays a significant role in boosting investor confidence and increasing issuance volumes, underlining the importance of strong governance and regulatory transparency. Unexpectedly, financial market depth shows a negative effect on green bond issuance, suggesting that deeper markets may allocate resources to traditional investments over green bonds, especially without sustainability-oriented mandates. Higher coupon rates deter issuance, indicating that financing costs remain a critical consideration for potential issuers. This research highlights the need for well-aligned policies that promote green finance while balancing profitability and sustainability. The study offers key insights for policymakers and corporations to enhance green bond engagement and support Europe’s climate goals, providing practical recommendations for fostering a resilient green finance ecosystem.