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The Green Bond Premium

54 Pages Posted: 27 Dec 2016 Last revised: 26 Aug 2017

Olivier David Zerbib

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

Date Written: August 25, 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 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

Zerbib, Olivier David, The Green Bond Premium (August 25, 2017). Available at SSRN:

Olivier David Zerbib (Contact Author)

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

50, Avenue Tony Garnier
Lyon Cedex 07, 69366

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