The Creation and Benchmarking of a Green Municipal Bond Index

26 Pages Posted: 5 Oct 2018

See all articles by Candace Partridge

Candace Partridge

University College London - QASER Laboratory

Francesca Medda

UCL Institute of Finance and Technology

Date Written: September 12, 2018

Abstract

As the green bond market grows, many are wondering if there is a pricing difference between green bonds and conventional bonds. In order to explore these ideas, we created bond indices specific to the green-labelled and climate-aligned municipal bond market, primarily to test the competitiveness of the green sector of the muni bond market against the overall muni bond market. We used the S&P municipal bond index construction methodology in order to compare like with like, and benchmarked the green and climate indices against their counterpart S&P municipal indices. We find that the green and climate muni indices showed CAGRs of 4.5% from 2014 to 2017, compared with 3% for the S&P Investment Grade Municipal index. We also created several sector and state sub-indices, which also outperformed their S&P counterparts.

Keywords: Green Bonds, Municipal Bonds, Infrastructure, Sustainability, ESG, SRI, Investment

JEL Classification: R51, G12, O18, Q56

Suggested Citation

Partridge, Candace and Medda, Francesca, The Creation and Benchmarking of a Green Municipal Bond Index (September 12, 2018). Available at SSRN: https://ssrn.com/abstract=3248423 or http://dx.doi.org/10.2139/ssrn.3248423

Candace Partridge (Contact Author)

University College London - QASER Laboratory ( email )

London
United Kingdom

Francesca Medda

UCL Institute of Finance and Technology ( email )

London
United Kingdom

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