Climate change exposure and green bonds issuance

In this study, we examine the relationship between firm-level climate change exposure and green bond issuance. We find that firms exposed to climate change are more likely to issue green bonds. This relationship is primarily motivated by the firms' desire to hedge against physical and regulatory risks rather than to capitalize on new climate-related opportunities. Green bonds issued by climate-exposed firms have lower proceeds, higher coupon rates and larger maturities. The issuance of such bonds is associated with higher ESG scores but not with lower carbon emissions. Our findings survive a battery of robustness tests including endogeneity checks, and are important to issuers, asset managers and bond market regulators.