Who finances the green transition? Evidence from the green bond market

41 Pages Posted: 30 Dec 2022 Last revised: 16 Jan 2024

See all articles by Daniel Fricke

Daniel Fricke

Deutsche Bundesbank

Stephan Jank

Deutsche Bundesbank

Christoph Meinerding

Deutsche Bundesbank

Date Written: December 29, 2022

Abstract

Merging a sample of matched green-conventional bond pairs with data on their ownership structure, we document that banks, investment funds, and insurances provide substantial financing towards the green transition. We also find that these investor groups pay for financing the green transition in that they bear the bulk of the greenium (the yield differential between green and conventional bonds). Strikingly, while investment funds pay the greenium largely due to their (clients') general green preference, banks display no such pattern. Rather, banks overweight certain green bonds with a sizeable greenium, pointing towards an interaction between the greenium and bank-specific financial frictions. Overall, our findings shed light on the question who finances the green transition and who ultimately pays the costs arising from greening investment portfolios.

Keywords: green bonds, sustainable investment, greenium, ownership structure, securities holdings

JEL Classification: G11, Q01

Suggested Citation

Fricke, Daniel and Jank, Stephan and Meinerding, Christoph, Who finances the green transition? Evidence from the green bond market (December 29, 2022). Available at SSRN: https://ssrn.com/abstract=4314538 or http://dx.doi.org/10.2139/ssrn.4314538

Daniel Fricke (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Stephan Jank

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Christoph Meinerding

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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