Don't stop greenin': green bond issuance and the equity halo effect

We conduct an array of event studies to investigate the potential impact of green bond issuance on the equity channel via the computation of a corporation’s corresponding listed equity’s alpha, which we coin the “equity halo effect”. We further investigate the pertinence of the green bond issuance signal to equity market investors and its evolution over subsequent same-issuer green bond issuances. Consistent with Baulkaran (J Asset Manag 20(5):331–340, 2019), we find that debut issuances tended, counterintuitively, to detract from equity alpha, albeit our findings similarly lacked statistical significance. Our findings, however, uniquely suggest that rather than diminish over time, the perceived marginal utility of the green bond issuance, as proxied by parent equity alpha, tends to be more appreciated by the equity market over time as it contributes to more material and statistically significant abnormal returns with return-issuance.