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The price of being green

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  • Koziol, Christian
  • Proelss, Juliane
  • Roßmann, Philipp
  • Schweizer, Denis

Abstract

This paper analyzes the funding advantage of green bonds and the determinants of what is referred to as the “greenium” (the “green” premium). To this end, we first separate the greenium from a simultaneously prevailing liquidity premium in empirical yield spreads. For green German government bonds, we determine a greenium of 68.0 to 81.2 basis points. Further panel regressions provide evidence that the greenium benefits from environmental awareness (such as daily aggregated green bond volume, Google search volume, and CO2 allowance prices) and a higher yield to maturity. But it suffers from higher market uncertainty as measured by the marketwide credit spread.

Suggested Citation

  • Koziol, Christian & Proelss, Juliane & Roßmann, Philipp & Schweizer, Denis, 2022. "The price of being green," Finance Research Letters, Elsevier, vol. 50(C).
    • Handle: RePEc:eee:finlet:v:50:y:2022:i:c:s1544612322004688
    DOI: 10.1016/j.frl.2022.103285
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    References listed on IDEAS

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    Cited by:

    1. Dorfleitner, Gregor & Eckberg, Jens & Utz, Sebastian, 2023. "Greenness ratings and green bond liquidity," Finance Research Letters, Elsevier, vol. 55(PA).
    2. Jin, Cheng & Lv, Zhiwei & Li, Zengrong & Sun, Kehan, 2023. "Green finance, renewable energy and carbon neutrality in OECD countries," Renewable Energy, Elsevier, vol. 211(C), pages 279-284.
    3. Silva, Florinda & Ferreira, André & Cortez, Maria Céu, 2024. "The performance of green bond portfolios under climate uncertainty: A comparative analysis with conventional and black bond portfolios," Research in International Business and Finance, Elsevier, vol. 70(PA).
    4. Emre Arat & Britta Hachenberg & Florian Kiesel & Dirk Schiereck, 2023. "Greenium, credit rating, and the COVID-19 pandemic," Journal of Asset Management, Palgrave Macmillan, vol. 24(7), pages 547-557, December.
    5. Mariantonietta Intonti & Laura Serlenga & Giovanni Ferri & Matteo De Leonardis & Giuseppe Starace, 2023. "The “Greenium” in Green Bonds: How Did It Change with COVID-19?," Sustainability, MDPI, vol. 15(7), pages 1-17, March.
    6. Wang, Congcong & Wang, Chong & Long, Huaigang & Zaremba, Adam & Zhou, Wenyu, 2024. "Green bond credit spreads and bank loans in China," International Review of Financial Analysis, Elsevier, vol. 94(C).

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    More about this item

    Keywords

    ESG; Green bond; Greenium; Sustainability;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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