Institutional Investors’ Preferences in Green Bonds and ESG Criteria: A Focus on German-Speaking Europe

Abstract

The aim of this paper is to study the influence of the current regulatory environment on the investment decisions of sustainability-oriented institutional investors within the German-speaking region of Europe. Through the use of a structured questionnaire, aimed at institutional investors, this paper presents detailed insights into the preferences of investors when purchasing green bonds, bonds that contribute to reducing or preventing adverse effects stemming from climate change. After analysing our sample of 179 participants, it is demonstrated that the credibility of a green bond is a basic prerequisite for an investor to purchase such an instrument. Additionally, the attractiveness of green bonds is influenced by financial factors such as tax incentives as well as the interest rate environment. Furthermore, this paper studies the influence of environmental, social and governance (ESG) strategies on green bond investment decisions, where it is revealed that the environmental pillar is the most important for investors.