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The Pricing and Ownership of US Green Bonds

Author

Listed:
  • Malcolm Baker

    (Harvard Business School, Boston, Massachusetts, USA)

  • Daniel Bergstresser

    (Brandeis International Business School, Waltham, Massachusetts, USA)

  • George Serafeim

    (Harvard Business School, Boston, Massachusetts, USA)

  • Jeffrey Wurgler

    (NYU Stern School of Business, New York, NY, USA)

Abstract

We review the pricing and ownership of green bonds, whose proceeds are used for environmentally focused purposes. After presenting an overview of the literature on green securities and green bonds in particular, we summarize the US corporate and municipal green bond markets. Green municipal bonds provide the best opportunity for detailed empirical study of how pricing and ownership differ from those of ordinary bonds. Green bonds are issued at a small premium of several basis points over similar ordinary bonds except when they are issued simultaneously with ordinary bonds from the same issuer; in that situation, a premium emerges over time on the secondary market. Green bonds, especially small or nearly riskless ones, are also more closely held than ordinary bonds. These facts are consistent with a simple framework that incorporates assets with nonpecuniary utility.

Suggested Citation

  • Malcolm Baker & Daniel Bergstresser & George Serafeim & Jeffrey Wurgler, 2022. "The Pricing and Ownership of US Green Bonds," Annual Review of Financial Economics, Annual Reviews, vol. 14(1), pages 415-437, November.
    • Handle: RePEc:anr:refeco:v:14:y:2022:p:415-437
    DOI: 10.1146/annurev-financial-111620-014802
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    Citations

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    Cited by:

    1. Moro, Alessandro & Zaghini, Andrea, 2023. "The green sin: How exchange rate volatility and financial openness affect green premia," CFS Working Paper Series 715, Center for Financial Studies (CFS).
    2. Agoraki, Maria-Eleni K. & Aslanidis, Nektarios & Kouretas, Georgios P., 2023. "How has COVID-19 affected the performance of green investment funds?," Journal of International Money and Finance, Elsevier, vol. 131(C).
    3. Zhou, Yuwen & Tian, Lixin & Yang, Xiaoguang, 2023. "Schumpeterian endogenous growth model under green innovation and its enculturation effect," Energy Economics, Elsevier, vol. 127(PB).
    4. Mascia Bedendo & Giacomo Nocera & Linus Siming, 2023. "Greening the Financial Sector: Evidence from Bank Green Bonds," Journal of Business Ethics, Springer, vol. 188(2), pages 259-279, November.
    5. Alessandro Moro & Andrea Zaghini, 2024. "The green sin: how exchange rate volatility and financial openness affect green premia," Temi di discussione (Economic working papers) 1447, Bank of Italy, Economic Research and International Relations Area.
    6. Ioannis Ioannou & George Serafeim, 2023. "What drives corporate social performance? The role of nation-level institutions," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(1), pages 14-23, February.
    7. Zaghini, Andrea, 2023. "Unconventional green," CFS Working Paper Series 710, Center for Financial Studies (CFS).
    8. G. Nocera & M. Bedendo & L. Siming, 2022. "Greening the Financial Sector: Evidence from Bank Green Bonds," Post-Print hal-04318899, HAL.
    9. Matteo Gasparini & Peter Tufano, 2023. "The Evolving Academic Field of Climate Finance," Harvard Business School Working Papers 23-057, Harvard Business School.
    10. Agliardi, Elettra & Alexopoulos, Thomas & Karvelas, Kleanthis, 2023. "The environmental pillar of ESG and financial performance: A portfolio analysis," Energy Economics, Elsevier, vol. 120(C).
    11. Serge Darolles & Gaëlle Le Fol & Yuyi He, 2023. "Who can better push firms to go "green"? A look at ESG effects on stock returns," Post-Print hal-04462749, HAL.
    12. Di Tommaso, Caterina & Perdichizzi, Salvatore & Vigne, Samuel & Zaghini, Andrea, 2024. "Is the government always greener?," CFS Working Paper Series 718, Center for Financial Studies (CFS).
    13. Jorge M. Uribe, 2023. ""Fiscal crises and climate change"," IREA Working Papers 202303, University of Barcelona, Research Institute of Applied Economics, revised Feb 2023.
    14. Martijn Boermans, 2023. "Preferred habitat investors in the green bond market," Working Papers 773, DNB.

    More about this item

    Keywords

    climate finance; ESG; green bond; municipal; SRI; sustainable;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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