IDEAS home Printed from https://ideas.repec.org/a/eme/imefmp/imefm-05-2023-0186.html
   My bibliography  Save this article

Exploring the greenium in the green Sukuk universe: evidence from the primary market

Author

Listed:
  • Burak Pirgaip
  • Ozgur Arslan-Ayaydin

Abstract

Purpose - This study aims to fill a gap in the literature by providing evidence for a “greenium” in the primary Sukuk market. The term “greenium” is defined in the study as the lower cost of capital or reduced yields that green Sukuk may offer compared to non-green Sukuk, reflecting investor willingness to accept lower returns for green investments. Therefore, the main aim of this study is to investigate the potential role of “greenium” as an incentive for issuers to fund eco-friendly projects, contributing to a sustainable environment. Design/methodology/approach - This study uses propensity score matching techniques to provide an accurate comparison of pricing differences between green and non-green Sukuk issued in global primary markets during the period 2017–2022. Findings - The results reveal that green Sukuk signify a “greenium” effect. This suggests that investors find green Sukuk attractive, willing to accept lower returns. Given the positive investor response to green initiatives in the market, issuers can capitalize on the growing demand for green Sukuk, leading to low-cost funding. Originality/value - This study makes an important contribution to the literature at the interface of Islamic finance and environmental sustainability. In particular, it stands out by focusing on the pricing dynamics in the green Sukuk market and highlights the potential benefits of issuing green Sukuk to help achieve sustainability goals while providing access to lower cost of capital for the transition to a low-carbon economy.

Suggested Citation

  • Burak Pirgaip & Ozgur Arslan-Ayaydin, 2024. "Exploring the greenium in the green Sukuk universe: evidence from the primary market," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 17(3), pages 423-440, May.
  • Handle: RePEc:eme:imefmp:imefm-05-2023-0186
    DOI: 10.1108/IMEFM-05-2023-0186
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/IMEFM-05-2023-0186/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers

    File URL: https://www.emerald.com/insight/content/doi/10.1108/IMEFM-05-2023-0186/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers

    File URL: https://libkey.io/10.1108/IMEFM-05-2023-0186?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Green Sukuk; Sukuk; Primary market; Greenium; Propensity score matching; E43; G12; G15; Q56;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:imefmp:imefm-05-2023-0186. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.