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Identification and pricing of labelled green bonds

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  • Singh, Vikram
  • Jain, Sonali
  • Singh, Shveta

Abstract

This paper precisely splits green bonds into ‘externally labelled’ (externally verified for greenness) and ‘internally labelled’ (unverified) instead of ‘self-reported’ and ‘non-self-reported’; and compares at-issuance yields between externally and internally labelled green bonds. We estimate yield differentials through mean difference and linear regression on post-matching samples. The verified green bonds register lower yields than the unverified ones. This implies lower risk in verified green bonds, culminating in interest cost savings to issuers. The cost advantage sustains in alternate samples but vanishes in adverse business scenarios. This paper calls for early regulation of the external labelling market before the cost advantage evaporates.

Suggested Citation

  • Singh, Vikram & Jain, Sonali & Singh, Shveta, 2025. "Identification and pricing of labelled green bonds," Finance Research Letters, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324017203
    DOI: 10.1016/j.frl.2024.106691
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    References listed on IDEAS

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    More about this item

    Keywords

    Green bond pricing; Yield differential; Green labelling; Municipal bond; Propensity score matching;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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