When Firms Lead States: Financial Intermediaries and the Politics of Sovereign Green Bond Issuance

Abstract Sovereign green bonds typically appear only after corporate green bond issuance has accumulated—a sequence at odds with the policy consensus that sovereign borrowing anchors debt market development. I argue that the inversion reflects market building by global investment banks. The four banks that authored the Green Bond Principles in 2014 used early private corporate transactions to build the verification practices, pricing conventions, and investor networks needed for a functioning market, then served as lead managers when sovereigns entered, transferring accumulated expertise across the public–private divide. States entered a market whose institutional infrastructure they did not design. The Cox proportional hazards model shows that accumulated corporate issuance significantly accelerates sovereign entry, while government agency issuance delays it by substituting for direct sovereign participation. A bank-level triangulation shows that founding-bank presence at sovereign entry reflects green-bond-specific expertise transfer rather than general dominance in sovereign debt underwriting. The findings identify financial intermediaries as a distinct channel through which sustainable finance reaches sovereign borrowers and show how privately constructed market conditions shape the terms on which states engage with global climate finance.