Who finances the green transition? Evidence from the green bond market
41 Pages Posted: 30 Dec 2022 Last revised: 16 Jan 2024
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: Suggested Citation