Do green bonds behave differently under geopolitical risk?

: evidence from a matched-pairs portfolio study (2020-2024)

Abstract

This thesis examines whether green bonds display different sensitivities to geopolitical risk compared to conventional corporate bonds. Despite the rapid expansion of the green bond market, little is known about its short-term behavior under geopolitical shocks, representing an important gap in the sustainable finance literature. To address this, the study constructs a bond level matched dataset of investment-grade issuances from Europe and the Americas, covering the period from 2020 to 2024. Green bonds are matched with non-green counterparts on key structural features, and portfolio returns are analyzed using dynamic regressions with controls for U.S. Treasury yields. The results show that geopolitical shocks generate a consistent two-day cycle: same-day losses of approximately 0.32 to 0.36 percentage points followed by near-symmetric rebounds. Treasury yields remain the dominant driver of daily variation, explaining over two-thirds of return movements. Green bonds exhibit a very small, short-lived cushion relative to conventional bonds, which reverse quickly and lack economic significance.

Date of Award	21 Oct 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Susana Campos Martins (Supervisor)