The market for green bonds, and environmentally aligned investment solutions, is increasing. As of 2022, the market of green bonds exceeded USD 2 trillion in issuance, with India, for example, having issued its first-ever sovereign green bonds totally R80bn (c.USD1bn) in January 2023. This paper lays the foundation for future papers and summarises the initial stages of our analysis, where we try to replicate the S&P Green Bond Index (i.e. this is a time series problem) over a period using non-traditional techniques. The models we use include neural networks such as CNNs, LSTMs and GRUs. We extend our analysis and use an open-source decision tree model called XGBoost. For the purposes of this paper, we use 1 day’s prior index information to predict today’s value and repeat this over a period of time. We ignore for example stationarity considerations and extending the input window/output horizon in our analysis, as these will be discussed in future papers. The paper explains the methodology used in our analysis, gives details of general underlying background information to the architecture models (CNNs, LSTMs, GRUs and XGBoost), as well as background to regularisation techniques specifically L2 regularisation, loss curves and hyperparameter optimisation, in particular, the open-source library Optuna.

Stefan Eich’s The Currency of Politics offers us a new way of looking at the EU’s sustainable finance trend, one that allows us to see how the ‘greening’ financial transactions creates “green money” and thus intertwines with questions of justice and democracy. In this contribution I explore how The Currency of Politics can help us understand the significance and the constitutional implications of the transformation of the euro into the ‘currency of the green transition’ as it has been referred to by Eurogroup’s President in 2021. I show how the three trends of EU green bond issuance, granular sustainable finance regulation and the progressive greening of monetary policy are moulding the euro in a political sense as the ‘currency of the green transition’ as much as the legal tender. Euro currency becomes in this sense ‘a governance project’ for the sustainable transition. This perspective offers multiple points of engagement with the themes of Stefan Eich’s important book. For example, the claim of privatisation of money creation must be qualified to reflect on the implications of the granular way in which EU law defines what green money is. At the same time, while a ‘green currency’ creates spaces for engagement and new forms of organising a polity, it still remains largely removed from ordinary citizens as ‘technocratic’ rather than ‘democratic’ self-government.

A structural model for green bonds is developed to explain the formation and dynamics of green bond prices and to address the issue of the so-called ‘greenium’, that is, the difference between the yields on a conventional bond and a green bond with the same characteristics. We provide answers to the following questions: What are the determinants of the green bond value? Do green bonds enhance the credit quality of the issuer? Are green bonds a relatively cheap tool to fund sustainable investments? We also study the effect of investors' environmental concern on portfolio allocation. Our results have direct policy implications and suggest that an improvement in credit quality could ultimately lead to a lower cost of capital for green bond issuers and that governmental tax-based incentives and an increase in investors' green awareness play a significant role in scaling up the green bonds market.