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1. Introduction
Climate change is the most actively debated topic in the 21st century. Many corporations have come under fire for contributing immensely to environmental degradation through the release of toxic chemical emissions. According to the Carbon Majors Report, since 1988, just 100 corporations are the source of more than 70% of Earth's greenhouse gas (GHG) emissions (Griffin, 2017). Businesses are the main culprits behind environmental pollution, and the financial system that funds its operations is equally responsible. The multitrillion-dollar global capital markets are funding carbon-producing activities that would raise the Earth's temperature by over four degrees Celsius, double to what was pledged in the 2015 Paris Agreement (Partington, 2019).
Fortunately, there has been some shift in the capital markets. The global pool of investors, who have previously been indifferent about what their investments were supporting, are now looking to make a difference with their investments. As a result, green financing has been gaining popularity in the past decade. Green bonds came into existence in 2007, when a team of Swedish pension funds wanted to invest in projects that fight global warming but did not know how to obtain funds (World Bank, 2019). They turned to the World Bank, who devised a new financing method that was impactful on the environment; thus, the world's first green bond was issued. The green bond market was originally a sovereign-dominated issuer market with issuers like the World Bank and European Investment Bank, but the green bond market has matured into a broader market that now includes corporate bonds, asset-backed securities, project and infrastructure assets and municipal issuers (Kochetygova and Jauhari, 2014).
Since 2014, the volume of global green bond issuance has been growing consistently year-on-year (Figure 1). 2017 green bond issuances almost doubled the issuance in 2016 while 2019 issuances reached a record high of USD 271 billion. A major force driving the green bond market growth is the introduction of corporate green bonds issued by private entities as opposed to national banks; since the private sector's involvement in 2013, the market almost tripled in value only one year later in 2014 (Talbot, 2017). Another important driving force behind the growth in this market is the popular demand for environmental-friendly financing among institutional investors, who represent the largest...