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The Green Bond Premium: A Comparative Analysis

Author

Listed:
  • Mariantonietta Intonti

    (Department of Economics and Finance - University “Aldo Moro†of Bari)

  • Laura Serlenga

    (Department of Economics and Finance - University “Aldo Moro†of Bari)

  • Giovanni Ferri

    (LUMSA University)

  • Matteo De Leonardis

    (Department of Economics and Finance - University “Aldo Moro†of Bari)

Abstract

The paper aims to analyze the presence of a premium on Green Bonds (GBs greenium), financial instruments issued with the specific purpose of contributing to the ecological transition, to facilitate the transformation of our economic system into a low carbon economy, resilient to climate change and resource efficient. The study, starting from the indications provided by Zerbib (2019), was carried out in four steps: the first, to determine the actual existence of a differential between the GB yields compared to a sample of traditional bonds; the second step, based on a panel analysis, to demonstrate that the differential is not due to typical market factors, but rather to the nature of GBs; the third step, characterized by a cross-section analysis, that has the objective to verify whether the characterizing components of the GBs, identified in the qualitative variables of currency, issued quantity, rating and type of issuer, are determinants of the "greenium" factor. Lastly, the evolution of the “greenium constant†over time is calculated to draw some final conclusions. The analysis period is from 2017 to 2022 for a total of 248 weekly observations. The analysis shows that greenium does not seem to be present for all categories of issuers. One of the possible reasons may be linked to the different degree of transparency observed by the different issuers. Finally, considering the time frame of the analysis (2017-2021) we can assert that the premium for GBs has undergone an evolution, over time, due to some triggering factors. The first is certainly the growth of interest in green finance. Secondly, the pandemic (as seen also by estimates made over time and by the presence of a structural break) played its role as protagonist, bringing with it an increase in the value of the differential for both government and corporate bonds, precisely in the period due to the first lockdown, characterized by a strong instability of the markets. Estimates have also shown that, for government bonds, the increase in greenium was not driven by liquidity shocks, unlike corporate bonds. This result reflects the importance that investors attach to the disclosure of information that is provided at the time of issue and during the life of the bond.

Suggested Citation

  • Mariantonietta Intonti & Laura Serlenga & Giovanni Ferri & Matteo De Leonardis, 2022. "The Green Bond Premium: A Comparative Analysis," CERBE Working Papers wpC40, CERBE Center for Relationship Banking and Economics.
    • Handle: RePEc:lsa:wpaper:wpc40
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    References listed on IDEAS

    as
    1. Zerbib, Olivier David, 2019. "The effect of pro-environmental preferences on bond prices: Evidence from green bonds," Journal of Banking & Finance, Elsevier, vol. 98(C), pages 39-60.
    2. Kingsley Y. L. Fong & Craig W. Holden & Charles A. Trzcinka, 2017. "What Are the Best Liquidity Proxies for Global Research?," Review of Finance, European Finance Association, vol. 21(4), pages 1355-1401.
    3. Fatica, Serena & Panzica, Roberto & Rancan, Michela, 2021. "The pricing of green bonds: Are financial institutions special?," Journal of Financial Stability, Elsevier, vol. 54(C).
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    5. Fatica, Serena & Panzica, Roberto, 2021. "Sustainable investing in times of crisis: evidence from bond holdings and the COVID-19 pandemic," Working Papers 2021-07, Joint Research Centre, European Commission.
    6. Raffaele Doronzo & Vittorio Siracusa & Stefano Antonelli, 2021. "Green Bonds: the Sovereign Issuers' Perspective," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 3, Bank of Italy, Directorate General for Markets and Payment System.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Perceived Inequality; Green Bonds; Greenium; Yields; Sustainable Transition;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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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