The Green Advantage: Exploring the Convenience of Issuing Green Bonds

Abstract

The issue of how to finance the transition to a low-carbon economy in order to achieve the Paris Agreement’s goal is crucial, especially considering the enormous amount of financing necessary to shift from rhetoric into action. Green bonds have recently emerged as one of the best candidates to help mobilizing financial resources towards clean and sustainable investments. Despite the growing relevance of green bonds, there is limited evidences on whether such bonds are actually convenient in comparison to other bonds with similar characteristics except for the “greeness”. By adopting a propensity score matching approach, we study 121 European green bonds issued between 2013 and 2017. We find that green bonds are more financially convenient than non-green ones. The advantage is larger for corporate issuers, and it persists in the secondary market. Our findings support the view that these bonds can potentially play a major role in greening the economy without penalizing financially the issuers.

Keywords: Green Bonds, Sustainability, Responsible Investment, Propensity Score, Fixed Income