Is There Value Generation by Sustainability-Linked Bond Issuances?

Amid increasing capital needs to finance sustainable transitions and growing investor interest in generating sustainable impact with their investment decisions, several sustainable bond products have emerged. Besides the well-known green bonds, sustainability-linked bonds (SLBs) have gained recent popularity. To assist companies and investors in understanding the implications of issuing SLBs, this article analyses value generation, measured by stock market reactions, around their announcements and documents a positive wealth effect. However, abnormal positive stock price changes persist only for specific subgroups of companies that (i) have not already issued a use-of-proceeds bond and (ii) for companies with high environmental standards. Overall, the results suggest that SLB issuances are not universally value-generating, but benefit specific firms, only.