(In)-Credibly Green: Which Bonds Trade at a Green Bond Premium?

53 Pages Posted: 28 Mar 2019 Last revised: 3 May 2021

See all articles by Julia Kapraun

Julia Kapraun

Goethe University Frankfurt - House of Finance

Carmelo Latino

Leibniz Institute for Financial Research SAFE

Christopher Scheins

Goethe University Frankfurt

Christian Schlag

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

Date Written: April 29, 21

Abstract

The most important determinant for the existence of a Green premium is the perceived "Green--credibility" of a bond and its issuer. We analyze a sample of more than 1,500 Green bonds with respect to their pricing on the primary and secondary market. On both markets, only certain types of bonds trade at a Green premium (i.e., exhibit lower yields) relative to their conventional counterparts, namely those, which are issued by governments or supranational entities, denominated in EUR, or corporate bonds with very large issue sizes. These bonds and their issuers seem to be viewed as more credible in terms of a better implementation or a greater impact of the Green projects financed with the proceeds. For corporate issues, credibility of the Green label is of particular importance. Investors are more likely to pay a premium for a Green bond, when it is certified as such by a third party, or when it is listed on an exchange with a dedicated Green bond segment and tight listing requirements.

Keywords: Green Bonds, Sustainable Investing, Green Premium, Impact Investing

JEL Classification: C33, G12, G14, G20, Q56

Suggested Citation

Kapraun, Julia and Latino, Carmelo and Scheins, Christopher and Schlag, Christian, (In)-Credibly Green: Which Bonds Trade at a Green Bond Premium? (April 29, 21). Proceedings of Paris December 2019 Finance Meeting EUROFIDAI - ESSEC, Available at SSRN: https://ssrn.com/abstract=3347337 or http://dx.doi.org/10.2139/ssrn.3347337

Julia Kapraun (Contact Author)

Goethe University Frankfurt - House of Finance ( email )

Theodor-W.-Adorno Platz 3
Frankfurt am Main, 60323
Germany

Carmelo Latino

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Christopher Scheins

Goethe University Frankfurt ( email )

Grüneburgplatz 1
Frankfurt
Germany

Christian Schlag

Goethe University Frankfurt ( email )

Faculty of Economics and Business
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany
+49 69 798 33699 (Phone)

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