## Sovereign Green Bonds: A Catalyst for Sustainable Debt Market Development?

_IMF Working Papers, June 14, 2024_

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**Canonical URL:** [Sovereign Green Bonds: A Catalyst for Sustainable Debt Market Development?](https://www.imf.org/en/publications/wp/issues/2024/06/14/sovereign-green-bonds-a-catalyst-for-sustainable-debt-market-development-550527)

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## Bibliographic details
- Authors: Gong Cheng, Torsten Ehlers, Frank Packer, Yanzhe Xiao
- Published: June 14, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400277030.001

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### Overview
- Sovereign issuers entered sustainable bond markets later than corporates, despite sovereign bonds typically providing benchmarks and catalyzing corporate bond market development.
- The empirical study examines whether sovereign green bond issuance affects the development of private sustainable bond markets.

### Key Findings
- Both the number and the size of corporate green bond issuance increase more in a jurisdiction after the sovereign debut.
- The effects are more pronounced in countries with stronger climate policies.
- Sovereign green bond issuance improves the quality of green verification standards in the corporate bond market, consistent with fostering third-party reviews and promoting best practice in green reporting and verification.
- The sovereign debut increases liquidity of corporate green bonds in the same jurisdiction.
- The sovereign debut diminishes yield spreads of corporate green bonds in the same jurisdiction.

### Policy Implications
- Sovereign green bond issuance can be used as a policy tool to catalyze private sustainable bond market development.
- Stronger national climate policies amplify the positive market effects of sovereign green bond issuance.
- Encouraging third-party verification and best-practice green reporting standards may strengthen market quality and investor confidence following sovereign green bond debuts.

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2024/06/14/sovereign-green-bonds-a-catalyst-for-sustainable-debt-market-development-550527_