The Green Bond Premium

54 Pages Posted: 27 Dec 2016 Last revised: 18 Oct 2017

Olivier David Zerbib

Tilburg School of Economics and Management; University of Lyon 1 - Institute of Finance and Insurance Science (ISFA)

Date Written: October 17, 2017


Using a matching method, we estimate and analyze the green bond premium, defined as the difference in yield between a green bond and an equivalent synthetic conventional bond. For the sake of accuracy, we focus our analysis on 135 Investment Grade senior bullet fixed-rate green bonds issued worldwide. The average green bond premium is found to be significantly negative from the green bonds' issuance date to December 30, 2016, especially in several market segments such as below-AAA EUR and USD bonds where the issued amount is greater than USD 100 million (-4 bps and -9 bps, respectively). We then explain this premium by the characteristics of the bonds to reconstitute a green yield curve. We conclude that regulatory and fiscal measures could help to continue feeding the pipeline and create incentive for increasing the volume of green bond issuances.

Keywords: Green bonds, Low-carbon finance, Sustainable finance, Asset management, Market microstructure, Liquidity, Green macroprudential regulation

JEL Classification: C23, G12, G14, G20, Q56

Suggested Citation

Zerbib, Olivier David, The Green Bond Premium (October 17, 2017). Available at SSRN: or

Olivier David Zerbib (Contact Author)

Tilburg School of Economics and Management ( email )

PO Box 90153
Tilburg, 5000 LE Ti

University of Lyon 1 - Institute of Finance and Insurance Science (ISFA) ( email )

50, Avenue Tony Garnier
Lyon Cedex 07, 69366

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