Abstract:

The research analyzes the challenges of the green bond market in Romania, considering historical constraints and the current regulatory framework and also the opportunities of developing these instruments in the future. Even though sustainable bonds includes green, social, and sustainability bonds, this study focuses specifically on the green bonds due to their role in financing environmentally sustainable projects at the global level.

Building upon our previous global study (2013–2023), which demonstrated the significant impact of green bonds on macroeconomic indicators such as GDP growth and inflation, this research assesses whether similar effects can be observed in Romania. Using econometric modeling and multiple economic scenarios (pessimistic, neutral, and optimistic) for 2024–2033, the study explores how green bond issuance influences economic stability and financial sustainability.

The findings indicate that Romania’s green bond market is still in its early stages, with limited issuance and regulatory gaps compared to other EU markets. But the main difficulties that Romania faces in developing  this market is the fact that regulations are not sufficiently adapted to the EU Green Taxonomy, it has no well-developed financial infrastructure, with low liquidity, and lack of awareness about the benefits of green bonds. However, the study also highlights Romania’s potential for growth, driven by increasing investor interest, European policy incentives, and a projected rise in sustainable investments.

Econometric modeling findings show that, under an optimistic scenario, green bonds will be a significant contributor to GDP growth, while in the pessimistic scenario, economic volatility and inflation could offset their maximum potential. This paper contributes to existing literature on emerging economies' green bond and provide insights for policymakers and investors about the potential of innovative financial instruments to accelarate Romania's economic transition to a sustainable economy.