How Large is the Sovereign Greenium?

Abstract

The development of green bond markets has been one of the most important financial breakthroughs in the domain of sustainable finance during the last 15 years. A central benefit associated with green bonds has been the green premium (greenium). Yet the issuances at the sovereign level have been relatively recent and not well documented in the literature. This paper assembles a comprehensive sovereign green bond database and estimates the sovereign greenium. We find that green bonds are issued at a relatively small premium (4 basis points on average) in Advanced Economies. Yet, importantly, greenium is growing over time and considerably larger (11 basis points on average) for Emerging Market Economies.

Keywords: Green bonds, sustainable finance, financial innovation, Sovereign debt, Greenium, Climate change