Do green bond issuers walk the talk? Exploring the alignment between green bond issuance and subsequent green investment

Green bonds are increasingly important as they are closely linked to climate change. However, there is a paucity of empirical knowledge regarding the effectiveness of green bonds in stimulating issuers' environmental engagement. Employing data of Chinese A-share listed firms during 2010-2020, we examine the impact of green bond issuance on corporate green investment. Our results show that green bonds are effective in supporting green investment, which persists even after a series of robustness tests. The above promotion effect predominantly originates from the supervision and resource effects of green bonds. Additional analysis reveals that repeated issuance of green bonds continues to positively impact green investment. When discussing the heterogeneous purposes of green bonds, we observe that only those issued for green governance purposes resulted in increased green investment. Subsequently, we distinguish the types of green investment, suggesting that green bonds encourage proactive green investment over reactive ones. Moreover, green bonds exert both the industry spillover effect and the performance increment effect. These findings not only provide valuable references for evaluating the effectiveness of green financing policies but also offer instructive implications for green bond issuers, investors, and regulators.