Anticipating Equity Investor Reactions to Green Bond Announcements

Green bonds fulfil market demand for debt securities and broaden the extent of proceeds used to fund climate-related initiatives. We explore equity market reactions to green bond announcements and the potential for ‘green’ investing behaviours to be anticipated. We advance investment analysis literature in two ways. First, we incorporate all 1,760 green bond announcement events by publicly-traded firms from 2013-2021. Second, we predict market anomalies using information available to investors. We find evidence of market inefficiencies preceding green bond announcements and, using neural networks, we find that relevant financial information can be exploited to outperform the market, net of fees