Despite the substantial growth of the sustainable debt market in recent years, it remains heavily concentrated in advanced economies, often referred to as the “Global North.” In 2024, sustainable debt issuance in the Global North has reached 2.6% of GDP, nearly four times the level in the Global South. Using cross-country panel data, we conduct an event study to examine whether differences in financial development can explain this divergence. We find that countries entering the post-Paris era with more developed financial sectors, particularly deeper capital markets, were faster to translate this capacity into the adoption of emerging sustainability practices and, in turn, gained stronger access to the sustainable debt market.
