*Article* **Analyzing the Characteristics of Green Bond Markets to Facilitate Green Finance in the Post-COVID-19 World**

**Farhad Taghizadeh-Hesary 1,\*, Naoyuki Yoshino <sup>2</sup> and Han Phoumin <sup>3</sup>**


**Abstract:** The COVID-19 pandemic and the global recessions have reduced the investments in green projects globally that would endanger the achievement of the climate-related goals. Therefore, the post-COVID-19 world needs to adopt the green financial system by introducing new financial instruments. In this regard, green bonds—a type of debt instrument aiming to finance sustainable infrastructure projects—are growing in popularity. While the literature does not contest their effectiveness in fighting climate change, research highlights the high level of risks and low returns associated with this instrument. This study analyzes the green bond markets in different regions with a focus on Asia and the Pacific. It aims to fill the gap in the literature by conducting a comparative study of the characteristics, risks, and returns of green bonds based on the region. The study is based on theoretical background and empirical analysis using the data retrieved from Bloomberg New Energy Finance and the Climate Bonds Initiative. The empirical results are based on several econometrics tests using panel data analysis estimation methods, namely pooled ordinary least squares and generalized least squares random effects estimator. Our findings prove that green bonds in Asia tend to show higher returns but higher risks and higher heterogeneity. Generally, the Asian green bonds market is dominated by the banking sector, representing 60% of all issuance. Given that bonds issued by this sector tend to show lower returns than average, we recommend policies that could increase the rate of return of bonds issued by the banking sector through the use of tax spillover. In the era of post-COVID-19, diversification of issuers, with higher participation from the public sector and de-risking policies, could also be considered.

**Keywords:** green bonds; post-COVID-19 era; Asia and the Pacific; green finance; sustainable development
