Turning investments green in bond markets: Qualification, devices and morality

Abstract

This paper explores the issuance and growth of transition and sustainability-linked bonds into the green market segment normally reserved for green bonds between 2018 and 2021. Using a performative economics and STS approach we examine how key terms within environmental political discourse – transition, green, sustainability – have been incorporated into the operation of investment markets, and given specific, if unstable and contested, technico-economic forms. Using event ethnography, industry literature and primary interviews, we examine how classification works as a market device, by exploring why the newer ‘transition bond’ was favoured by some investors but not others in comparison to green and sustainability bonds. We argue that the credibility of different green labelled products is being mediated by uneven references to scientific evidence, in the context of competing marketization strategies, which have world-making effects.

Keywords:

• green bonds
• transition bonds
• sustainability-linked bonds
• green finance
• marketization
• science and technology studies (STS)

Acknowledgements

The authors would like to thank the editors and anonymous reviewers for their extremely helpful and insightful comments and suggestions.

Disclosure statement

The authors report there are no competing interests to declare.

Ethical approval statement

We confirm that prior to starting the study, ethical approval was obtained from King’s College London reference number MRA-20/21-23353.

Notes

1 The term ‘brown bonds’ is widely used in green finance, where ‘brown’ refers to high-carbon emitting assets, industries or sectors. ‘Vanilla bonds’ are mainstream products with no carbon assignation, while ‘green’ are low-carbon emitting. Because of racialized connotation we have used ‘high-emitting’ to refer to these assets, industries or sectors, excepting in the text reporting on the research transcripts, where we have reproduced the language use of respondents.

Additional information

Funding

We gratefully received financial support from the King’s College London, Faculty of Social Science and Public Policy Research Fund (2020–2021)

Notes on contributors

Sarah Bracking

Sarah Bracking is a Professor in Climate and Society at King’s College London with research interests in climate and green finance. She is editor of Corruption and Development (2007), author of Money and power (2009), The financialisation of power (2016), and joint author of Valuing development, environment and conservation: Creating values that matter (2019).

Maud Borie

Maud Borie is a Lecturer in Environment, Science & Society at King’s College London with expertise in Science & Technology Studies. Her research focuses on resilience and disaster risk, and the politics of environmental knowledge, particularly in the context of biodiversity-related issues and in the green finance industry.

Glenn Sim

Glenn Sim is a PhD student at King's College London, exploring how banks and fund managers are incorporating climate risk into asset pricing. He holds a MA in Social Policy from the LSE and a BA(Hons)/MA(Oxon) in Geography from Oxford.

Theo Temple

Theo Temple is a PhD student at King's College London, examining the political geographies of property taxation in Brazil. He is interested in how critical work on public finance can contribute to debates about sovereign power and biopolitics. He holds a BA and MA from the University of Liverpool.