The Green Bond Premium
54 Pages
Posted: 27 Dec 2016
Last revised: 26 Aug 2017
University of Lyon 1 - Institute of Finance and Insurance Science (ISFA)
Date Written: August 25, 2017
Abstract
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 segments, such as EUR and USD bonds where the issued amount is greater than USD 100 million (-2 bps and -5 bps, respectively) and particularly in the subsamples of below-AAA EUR and USD bonds (-4 bps and -9 bps, respectively). In addition, we analyze the determinants of the green bond premium. We conclude that regulatory and fiscal measures are required to keep on feeding the pipeline and incentivize an increasing volume of green bonds 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:
Suggested Citation
Zerbib, Olivier David, The Green Bond Premium (August 25, 2017). Available at SSRN: https://ssrn.com/abstract=2889690
