We introduce a measure of green bonds’ carbon footprint based on project-level data and industry guidelines. This measure captures the avoided emissions generated by green-bond financed projects and is constructed by estimating both project emissions and the relevant counterfactual emissions. Using this metric, we revisit the inconclusive literature that evaluates corporate green bonds using firm-level emissions data. We derive several important insights. First, green bonds deliver meaningful environmental benefits: on average, avoided emissions are roughly ten times larger than the emissions generated by the financed projects. Second, in the cross-section, larger issuers undertake projects with higher avoided-emissions intensity. Third, inferences based on our measure and those derived from firm-level emissions yield divergent patterns, particularly with respect to issuer size. Taken together, our findings suggest that the mixed results in the existing literature may reflect a level-of-analysis problem: the environmental impact of green bonds becomes diluted when measured at the firm level.
