Moral hazard or adverse selection

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Reference no: EM133377953

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 surpassed USD 2trillion.

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?

Why do you think investors are interested in these bonds, when the yields are typically lower than similarly rated/dated debt instruments?

What could be done to solve the issues surrounding information asymmetry in the Sustainable/Green Bond market? Be specific.

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?

Reference no: EM133377953

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