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Where's the Greenium?

Author

Listed:
  • Larcker, David F.

    (Graduate School of Business, Stanford University and Rock Center for Corporate Governance)

  • Watts, Edward M.

    (Graduate School of Business, Stanford University)

Abstract

This study investigates whether investors are willing to trade-off wealth for societal benefits. We take advantage of unique institutional features of the municipal securities market to provide insight into this question. Since 2013, over $23 billion Green Bonds have been issued to fund eco-friendly projects. Comparing Green securities to nearly identical securities issued for non-Green purposes by the same issuers on the same day, we observe economically identical pricing for Green and non-Green issues. In contrast to a number of recent theoretical and experimental studies, we find that in real market settings investors appear entirely unwilling to forgo wealth to invest in environmentally sustainable projects. When risk and payoffs are held constant, municipal investors view Green and non-Green securities by the same issuer as almost exact substitutes. Thus, the “greenium†is essentially zero.

Suggested Citation

  • Larcker, David F. & Watts, Edward M., 2019. "Where's the Greenium?," Research Papers 3766, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3766
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    File URL: https://www.gsb.stanford.edu/gsb-cmis/gsb-cmis-download-auth/474556
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    Cited by:

    1. Clara I. González & Soledad Núñez, 2019. "Mercados, entidades financieras y bancos centrales ante el cambio climático: retos y oportunidades," Working Papers 2019-06, FEDEA.
    2. André Tomfort, 2023. "Making Green Bonds Greener: Proposals to Increase the Efficiency of Green Bonds," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 13(1), pages 1-5.

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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