GREEN BONDS IN CLIMATE FINANCE AND FORECASTING OF CORPORATE GREEN BOND INDEX VALUE WITH ARTIFICIAL INTELLIGENCE

Abstract

The effects of global climate change and increasing environmental awareness have led to an increase in the significance of climate projects and, accordingly, climate finance and green bonds. Despite the increasing significance, the fact that the price forecasting studies on green bonds are extremely scarce has been the main motivation of this study. The aim of this paper is to forecast the corporate green bond prices with the Artificial Neural Network model and to determine the predictor by addressing the conceptual framework of green bonds. For this purpose, the Multi-Layer Feedback Artificial Neural Network (MLF-ANN) model, in which S&P 500 index prices are determined as input and S&P green bond index prices as output, is designed. To determine whether the conventional bond prices are the predictor of the corporate green bonds, the S&P 500 index was used as the sole input of the forecasting model. The findings show that corporate green bond prices are forecasted with 1.13% Mean Absolute Percentage Error (MAPE) and 98.93% Regression Determination Coefficient (R2). The results of the research provide data to maximize profits and/or minimize risk for green bond investors and market makers, while providing insight into the effectiveness of green bonds in financing climate projects for policy makers. This paper is the first study in the literature in terms of proving the effectiveness of the MLF-ANN model in forecasting corporate green bonds and revealing that conventional bonds are predictor of green bonds. Thus, it is expected that the study will shed light on future studies.

Keywords

• Green bonds forecasting
• Artificial Neural Network model
• Predictor of green bonds
• Conventional bonds.

GREEN BONDS IN CLIMATE FINANCE AND FORECASTING OF CORPORATE GREEN BOND INDEX VALUE WITH ARTIFICIAL INTELLIGENCE

Abstract

Küresel iklim değişikliğinin etkileri ve artan çevre bilinci, iklim projelerinin ve buna bağlı olarak iklim finansmanı ve yeşil tahvillerin öneminin artmasına yol açmıştır. Artan önemine karşın yeşil tahvillere ilişkin fiyat tahmin çalışmalarının son derece az olması, bu çalışmanın temel motivasyonunu oluşturmuştur. Bu makalenin amacı, yeşil tahvillerin kavramsal çerçevesini ele alarak kurumsal yeşil tahvil fiyatlarını Yapay Sinir Ağı modeli ile tahmin etmek ve tahmin ediciyi belirlemektir. Bu amaçla, girdi olarak S&P 500 endeks fiyatlarının ve çıktı olarak S&P yeşil tahvil endeks fiyatlarının belirlendiği Çok Katmanlı Geri Beslemeli Yapay Sinir Ağı modeli tasarlanmıştır. Konvansiyonel tahvil fiyatlarının kurumsal yeşil tahvillerin tahmincisi olup olmadığını belirlemek için tahmin modelinin tek girdisi olarak S&P 500 endeksi kullanılmıştır. Bulgular, kurumsal yeşil tahvil fiyatlarının %1,13 Ortalama Mutlak Yüzde Hatası (MAPE) ve %98,93 Regresyon Belirleme Katsayısı (R2) ile tahmin edildiğini göstermektedir. Araştırmanın sonuçları, yeşil tahvil yatırımcıları ve piyasa yapıcıları için kârı en üst düzeye çıkarmak ve/veya riski en aza indirmek için veriler sağlarken, politika yapıcılar için iklim projelerini finanse etmede yeşil tahvillerin etkinliğine ilişkin iç görü sağlamaktadır Bu makale, MLF-ANN modelinin kurumsal yeşil tahvillerin tahmininde etkinliğini kanıtlaması ve konvansiyonel tahvillerin yeşil tahvillerin tahmincisi olduğunu ortaya koyması açısından literatürdeki ilk çalışmadır. Bu nedenle çalışmanın ileride yapılacak çalışmalara ışık tutması beklenmektedir.

Keywords

• Yeşil tahvil tahmini
• Yapay Sinir Ağı modeli
• Yeşil tahvillerin tahmincisi
• Konvansiyonel tahviller

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