Copenhagen Business School Master Thesis 15 Sept 2021
Figure (5.4) Source adapted from: (SASB, 2021)
Philosophy of Science Position
In the context of a green energy transition, or rather decarbonising the energy sector, using CO2 as a metric most relevant and feasible due to data availability. While the quantitative analysis deals with econometric methods, the underlying research philosophy is positivism as the subject matter deals with facts and hard data rather than impressions. The findings are based on observable social realities and the results, similar to natural science, makes generalisation that are law-like and follow a inductive method (Saunders, 2015).
The qualitative research on the other hand, while still inductive, uses institutional theory in order to analyse and discuss a few of the underlying factors that affect the performance of green bonds and their ability to develop and drive the green energy transition. Therefore, the epistemological position adopted for this part of the thesis is based on interpretivism.
While combining positivism and interpretivism could result in very conflicting conclusions, this study combines the two in order to merge the multidisciplinary aspects that define the thesis. By adopting an interpretivist approach to the qualitative research and the results of the quantitative research, we are able to go beyond the relative simplification of laws that positivism produces. As researchers, an interpretivist approach allows us to discuss complexities observed in various green bond markets that a positivist might over-look or ignore i.e. the importance of social actors and their idiosyncratic interpretations of what constitutes ‘green’. Additionally, this approach provokes an empathetic stance by the researcher, something that is key in the discussion of common but differentiated responsibilities related to fighting climate change (Saunders, 2015).
Primary Data Collection Methodology - Interviews
In order to collect data that fits into the specific and highly narrow scope of our thesis,
Copenhagen Business School Master Thesis 15 Sept 2021
primary data was obtained through interviews. The interviews were conducted with energy sector experts, climate scientists, as well as professionals within finance that have extensive experience working with fixed income markets and green bonds. The full transcripts of these interviews can be found in the appendix and serve to provide context to answers we have quoted or paraphrased in the discussion. This ensures that we do not misquote or misconstrue any of their statements, while we have also left out names of interviewees who asked to remain anonymous.
In order to enable a most effective interview in terms of producing knowledge and usable data, a semi-structured interview technique was applied to every interview. This structure not only fits with an inductive approach as it allows the interviewee to introduce us to topics we might not have known about, but the structure also allows for better flexibil-ity in posing the right questions that are better tailored to the individual interviewee’s background and knowledge. This structure, as opposed to structured interviews which are highly standardised, allows for more in-depth questions about certain topics or an-swers and ultimately lead to interviews that produce more knowledge and usable data.
The unstructured interview structure was not chosen because the interviews needed to be highly focused on the exact scope of the thesis and their experience and background information always was integrated into developing interview questions beforehand to get the best results (Saunders, 2015).
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Data
6.1 Energy-sector population
The data source for firm-level data is EIKON1Refinitiv 2 . EIKON has been chosen as the main data sources as it gives the possibility to students to access their database from home. It has been just easier to access information from home during the corona lock-down period. Moreover, I could save the research made as EIKON offers CBS students the chance to sign up directly with their own CBS mail account. Specifically, we found one of the many advanced research tools particularly useful. It is called “Government and Corporate Bonds”. It gives the user the possibility to define a universe, in this case the universe of governmental and corporate bonds, and filter such a large universe, i.e., 882.879 results, with multiple conditions.
The first condition is that the selected sample must include only bonds issued by corpo-rations as we follow the methodology of (Flammer, 2021). Moreover, the bond type must be a bond and not a certificate of deposit or a commercial paper. The certificates of de-posit (CDs) are different from bonds regarding the investment horizon. In fact, although both financial instruments are debt-based, fixed-income securities, CDs are a short-term investment vehicle, whereas bonds are long-term ones. Similarly, the difference between
2Refinitiv is an American-British global provider of financial market data and infrastructure, whose head quarter is in New York. Refinitiv main parent organization is the London Stock Exchange Group. It was founded in 2018, and it was formerly known as Thomson Reuters.
2EIKON Refinitiv is one of the software products of the Refinitiv portfolio. EIKON Refinitiv is a software application that allows financial analyst to monitor and analyse financial information. It makes available data on different asset classes, e.g., currency market, stock market, commodities, and last but not least fixed income market. Among the different market application embedded in EIKON Refinitiv, the equity research aims at helping financial analyst to closely follow and analyse listed companies.
Copenhagen Business School Master Thesis 15 Sept 2021
commercial paper and corporate bonds is that the former is typically used for raising short-term funding requirements such as working capital.
Another relevant condition is that the Sukuks bonds are excluded, i.e., specially tailored financial products that conform to the set of ethical and common law– based financial transaction principles laid out in Shari’ah, or Islamic law (Safari, Ariff, & Mohamad, 2014).
An important condition regards the choice of timeline. In fact, the issue date for a bond in the sample selection is set between the 1/1/2012 and 31/12/2020. We chose to start in 2012 as the first ever corporate green bonds have been issued for the first time in 2012.
Since then, the market has exploded, from$10 billion in 2013 to over $40 billion in 2015 and is projected to exceed $100 billion in 2016 (Rosembuj & Bottio, 2016). We ended our timeline in 2020 as the post-issuance performance of corporations is measured in the period following the bond issuance.
The final constraints consist in setting the SIC codes equal to the industries that we wanted to analyse. A list of 32 different SIC codes is presented in 10.1. The result of such research is a dataset of 10895 unique rows called “Universe of bonds”. Each row is a bond issuance which is described by 121 different variables. Summary statistics for the
“Universe of bonds”.