Our study investigates the issuance of green municipal bonds around the political cycle in the United States. Using state-quarter level data from 2014 to 2023, we examine how the share of green bonds in total municipal issuance changes in the period preceding elections. Our results show that on average, green issuance rises by 1.6% during pre-election periods, with the effect concentrated in states governed by Democratic incumbents. We further document that Democratic leaders tend to increase green issuance in less competitive races, where political security enables them to pursue long term environmental goals. Additionally, reduced political risks lower borrowing costs, providing a financial channel that further boosts green issuance. Republican states, however, make little use of green bonds, consistent with their lower emphasis on environmental agendas. These findings indicate that a predictable and stable political environment creates favourable conditions for sustained green financing. Overall, gubernatorial elections provide a unique window into how political dynamics shape financing decisions, highlighting that the path of green financial innovation cannot be understood apart from democratic processes.
