| dc.description.abstract | The allocation of capital to green projects have increased in recent years as focus on climate
change and the necessity to transit to a more sustainable and carbon neutral environment have
intensified. With decarbonization high on the agenda, and global regulations right around the
corner, shipping companies must make important decisions today about which type of
technology will be installed on their vessels in the decades to come.
One instrument for allocating capital to green projects is the issuance of green bonds, whose
popularity have exploded since the signing of the Paris Agreement. Because of the highly
global and cyclical nature of the shipping industry, the changing face of green project
financing raises an important question concerning whether green bond issuance influences the
decision making of institutional investors in the shipping industry. Do institutional investors
reward shipping companies who raises capital to fund green projects?
This study addresses this issue by investigating the fundamental change in shipping
companies’ ownership structure and risk profile in the years following implementation of
green projects. Employing structural equation modeling, this study examines whether and how
green bond issuance increase institutional ownership and reduce equity risk. We find evidence
that following green bond issuance; total and unsystematic equity risk is reduced, cost of
equity is reduced, and relative valuation is increased. Changes in institutional ownership is
inconclusive.
The implications of the findings are that equity owners in shipping companies could
potentially reap benefits from implementing green projects, by issuing green bonds. | en_US |
