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Green Bonds Are Making Fewer and Fewer Promises to Investors

New research suggests incentives trump enforcability in a $5.5 trillion market.

A wind turbine and a local resident on a bicycle in Jaffna district, Sri Lanka.

A wind turbine and a local resident on a bicycle in Jaffna district, Sri Lanka.

Photographer: Jonathan Wijayaratne/Bloomberg
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In art, green is created by mixing together the primary colors of blue and yellow. In finance, green is created by mixing together a hefty dose of promotion and lax bond documentation.

The market for green bonds — or debt meant to finance renewable energy and other sustainability-related projects — has exploded in recent years. But the tide may now be turning for environmental, social and governance investing due to fresh regulatory scrutiny and political opposition.