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Green is the new black

Author

Listed:
  • Moro, Alessandro
  • Zaghini, Andrea

Abstract

Donald Trump's re-election and renewed exit from the Paris Agreement marked a deterioration in the US green bond market. Using a difference-in-differences approach, we estimate a 4.4-6.0 percentage point drop in issuance probability and a USD 20-28 million decline in monthly green-issuance volume per issuer. As a result, 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. At the same time, the greenium - the typically negative yield spread between green and traditional bonds with similar characteristics - turned from negative to positive. This change in the greenium, coupled with reduced issuance, signals weakened investors' 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

  • Moro, Alessandro & Zaghini, Andrea, 2026. "Green is the new black," CFS Working Paper Series 741, Center for Financial Studies (CFS).
    • Handle: RePEc:zbw:cfswop:336812
    DOI: 10.2139/ssrn.6247059
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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
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • 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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