Comment on “How Sovereign Sustainable Bond Issuance Shakes Up the Corporate Sustainable Bond Market?: Evidence From Asian Markets”

Kim et al. (2026) address a relevant aspect of the sustainable finance market, namely, the relationship between sovereign and corporate green bond issuances, which has so far received limited attention in the literature. The application to Asian markets is both interesting and pertinent, given the growing role of Asian countries in the global development of green finance. Several Asian economies have moved rapidly toward decarbonization through the introduction of climate policies and regulations, as well as through ambitious investment programs, including the issuance of sovereign green bonds. Public investment and policy initiatives may influence market reactions, for example, through signaling effects and the alignment of investor expectations, thereby potentially affecting corporate issuances. In general, sovereign green bond markets have continued to attract strong investor demand, even during periods of waning climate policy ambition, with issuances frequently being oversubscribed. Clarifying the greenness classification is crucial, as it shapes the interpretation of the greenium results (which depend in part on how “green” is defined; see Alessi et al. 2021; De Angelis and Monasterolo 2024) and provides an explanation for observed price and liquidity signals, and for eligibility in asset purchase programs (Bressan et al. 2022). The signaling effect has recently been explored in the literature, including the influence of a country's green policies and regulations on institutional investors' sustainability preferences (Barber et al. 2021), and the potential impact of sovereign sustainable bond issuance on the demand for and supply of corporate sustainable bonds. These factors may contribute to lower yields and enhanced liquidity. The formalization of the transmission channels through which sovereign sustainable bond issuance affects corporate bond markets is critical for both model specification and the interpretation of the results. I commend Kim et al. for addressing my earlier comments on the conference version of their paper in a comprehensive and clear way. First, Ki et al. have clarified the definition of sustainable bonds which cover green bonds and sustainability bonds within the sample, which includes eight Asian sustainable bond markets, namely Hong Kong, Korea, India, Indonesia, Malaysia, Philippines, Singapore, and Thailand, and the data provider used (Bloomberg). Second, Kim et al. clearly discuss the signaling effect in their Sections 1 and 4, to better understand the market's pricing reaction. Furthermore, they identify the greenium as part of the yield spread, consisting of a greenium and a risk premium, in line with recent literature (Flammer 2026). They consistently find that the greenium narrows after the sovereign sustainable bond debut. Regarding the model specification, it is worth noting that the eight countries in the sample differ substantially in their levels of market development and in their economic, financial, and climate characteristics. I argued that such heterogeneity could affect issuance behavior and could be leveraged to gain deeper insights into the drivers of the results in terms of issuance volume, yields, maturities, and related aspects. I suggested that the authors clarify how they control for country-level heterogeneity, including Greenhouse Gas (GHG) emissions, and the presence of climate policies and green investments, and their potential crowding in/out effect. Kim et al. have addressed my points by including a country dummy and industry dummy in the panel vector autoregression (VAR) model in order to control for country heterogeneity. In addition, the fixed effects would account for country time-invariant information while the lagged terms of the variables would account for time-variant country information. My final comment regarded the sample selection. The authors clarified why they excluded China from the sample, given its market size and development. As a potential area of future research building on their current work, Kim et al. could test for the impact of unwinding climate policy and regulation on main markets for green bonds' issuances in the eight Asian economies. Indeed, recently, the legislation on ESG and climate risk disclosure has experienced important changes that contributed to weaken investors' disclosure regulation, both in the US and in the European Union (EU), following political developments in both regions. There is already some evidence that US investors' equity portfolio composition has started to react with some reallocation, while the EU ones show a slower adjustment path. It would be interesting to study whether and how the Asian market is responding to such changes. Another related development could include the analysis of the ownership structure. In particular, Kim et al. could study how the bonds' and ownership structure from the US and EU affect the green bonds market in Asia. This would shed new light on the green bonds market response to such developments. Finally, as the literature showed that sophisticated investors reward more objective, energy and technology-based firms' greenness measures (Battiston et al. 2023), applying this measure of greenness to the sample and comparing results with the definition of green used in Kim et al. (2026) (as in a horse race) could add new insights on the paper's results.