The impact of ESG regulations on green bond market efficiency: evidence from BRICS countries

Purpose This study explores how the enforcement of environmental, social and governance (ESG) regulations influences the pricing efficiency of green bonds in Brazil, Russia, India, China and South Africa (BRICS) countries. This study aims to evaluate whether stricter regulatory implementation enhances market efficiency and how institutional factors moderate this relationship. Design/methodology/approach The analysis is based on a large panel data set of publicly traded green bonds in BRICS nations. Econometric techniques are applied to assess the impact of ESG regulation enforcement, while endogeneity issues are addressed and robustness checks are conducted to ensure reliability of results. Findings The results show that stronger ESG regulatory enforcement significantly improves the pricing efficiency of green bonds. However, this positive effect weakens when analyst coverage and reputable audit firms are involved, highlighting potential knowledge asymmetry and monitoring substitution effects. The findings remain consistent across alternative specifications. Originality/value This paper extends the literature on sustainable finance by demonstrating the critical role of ESG regulatory enforcement in shaping market efficiency in BRICS countries. It offers a novel perspective by examining the interplay between regulation, market-based monitoring and information asymmetry in green bond markets.