Last year Canada issued its inaugural green bond. A Green Bond is a financial instrument for which the funds raised are used to finance green projects. There has been huge growth in demand for these types of investments. In fact, last year (2022) the global value of green bond issuances exceeded USD 2 trillion.

 

How might information asymmetries particularly manifest in the context of Green Bonds Is it typically an example of Moral Hazard or Adverse Selection? What information might the issuer have that the lender (investor) does not?

Choose one of the big (Canadian) banks (RBC, CIBC, TD, BMO, Scotia) and find their "Sustainable Bond Framework". Does this framework address the problems you identified around information asymmetry? Why or why not?

Answer rating: 100% (QA)

Information asymmetry can manifest in the context of Green Bonds in a few ways The issuer of the Green Bond may have better information about the envi... View the full answer