Are thematic bond issuers keeping their promises? A contribution to the greenwashing analysis

We analyse the degree of transparency of companies issuing green, social and sustainability bonds in the largest Latin American market, Brazil, by conducting a content analysis of preand post-issuance reports and indentures of bonds issued in 2021. We find low disclosure rates, with 26% of issuers publishing a bond framework and 21% of transactions having an allocation report. We also find that penalty mechanisms of bond indentures for non-reporting are not being implemented. On a positive side, we find that 55% of funds are raised to finance future projects, consistent with the view that labelled bonds serve to attract new funding to sustainable projects. The findings suggest that the cost of compliance discourages issuer disclosure and that market participants are not demanding transparency. They also indicate that self-regulation such as ICMA guidelines are insufficient to promote improved issuer transparency. This paper contributes to the academic literature by analysing how companies engage in greenwashing in the financial sector not by making false claims, but by omitting from investors key information to assess bond performance.