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Green is the new black

Author

Listed:
  • Alessandro Moro

    (Bank of Italy)

  • Andrea Zaghini

    (Bank of Italy)

Abstract

Donald Trump's re-election and the United States' renewed withdrawal from the Paris Agreement marked a deterioration in the US green bond market: the share of green bonds in the US market dropped from 1.7 per cent in the pre-Trump period to just 0.6 per cent thereafter. Using a difference-in-differences approach, we estimate a decline of 4.4-6.0 percentage points in the probability of issuing green bonds and a reduction of 20-28 million USD in monthly green bond issuance per issuer. At the same time, the greenium - the typically negative yield spread between green and conventional bonds with similar characteristics - turned positive. This shift in the greenium, coupled with a decline in issuance, points to weakened investor demand for green assets, likely driven by both reduced environmental concerns and less optimistic outlook for environmentally conscious firms. The impact of Trump's re-election and policies on green bonds was stronger in the US than in other markets, highlighting diverging trajectories in sustainable finance at the international level.

Suggested Citation

  • Alessandro Moro & Andrea Zaghini, 2026. "Green is the new black," Temi di discussione (Economic working papers) 1538, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1538_26
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • 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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