Does it Pay to Be Green?

16 Pages Posted: 27 Feb 2017

See all articles by Andreas Karpf

Andreas Karpf

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES)

Antoine Mandel

Université Paris I Panthéon-Sorbonne; Climate Finance Alpha

Date Written: February 24, 2017


In the recent years green bonds became a popular example of climate finance instruments. Although the volume of the green bond market has been increasing steadily in the last years, the actual impact of the “green label” on the market of bonds is still poorly understood. This article investigates the yield term structures of green and brown (standard) bonds from the same set of issuers in the US American municipal bonds market. We show that, although returns on brown bonds are on average higher than for green bonds, this spread can to a large extent be explained by properties of the respective issuing entity and the bond. The “green nature” of the bond rather seems to be penalized by the market, as green bonds are traded at lower prices/higher yield than would be expected by their credit profiles.

Keywords: green bonds, climate finance, low-carbon finance, sustainable finance

JEL Classification: C5, C58, G12, G20, Q56

Suggested Citation

Karpf, Andreas and Mandel, Antoine, Does it Pay to Be Green? (February 24, 2017). Available at SSRN: or

Andreas Karpf (Contact Author)

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES) ( email )

106-112 Boulevard de l'hopital
106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647

Antoine Mandel

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005

Climate Finance Alpha ( email )

20 rue de Vintimille

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