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Sustainable versus conventional bonds: A comparative analysis of primary market spreads

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  • Pinto, João
  • Ribeiro, Diva

Abstract

This paper provides a comparative analysis of the credit spreads and pricing of sustainable and conventional bonds issued by nonfinancial firms worldwide between 2012 and 2022. We find that sustainable and conventional bonds respond differently to common pricing factors, with investors placing less emphasis on credit ratings when pricing sustainable bonds. On average, there is no significant difference in credit spreads between sustainable and comparable conventional bonds, a result that holds across matched sample analysis and endogenous switching regression models. However, during the COVID-19 crisis, green and sustainability bonds were associated with significantly lower spreads, suggesting increased investor demand for ESG-linked instruments in periods of uncertainty. Finally, we show that contractual, macroeconomic, and firm-level characteristics influence the choice between sustainable and conventional bond issuance.

Suggested Citation

  • Pinto, João & Ribeiro, Diva, 2026. "Sustainable versus conventional bonds: A comparative analysis of primary market spreads," Journal of International Money and Finance, Elsevier, vol. 166(C).
    • Handle: RePEc:eee:jimfin:v:166:y:2026:i:c:s0261560626000719
    DOI: 10.1016/j.jimonfin.2026.103586
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    Keywords

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    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • 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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