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The effect of pro-environmental preferences on bond prices: Evidence from green bonds

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  • Olivier David Zerbib

    (Tilburg University [Netherlands], SAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon)

Abstract

We use green bonds as an instrument to identify the effect of non-pecuniary motives, specifically pro-environmental preferences, on bond market prices. We perform a matching method, followed by a two-step regression procedure, to estimate the yield differential between a green bond and a counterfactual conventional bond from July 2013 to December 2017. The results suggest a small negative premium: the yield of a green bond is lower than that of a conventional bond. On average, the premium is -2 basis points for the entire sample and for euro and USD bonds separately. We show that this negative premium is more pronounced for financial and low-rated bonds. The results emphasize the low impact of investors’ pro-environmental preferences on bond prices, which does not represent, at this stage, a disincentive for investors to support the expansion of the green bond market.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Olivier David Zerbib, 2019. "The effect of pro-environmental preferences on bond prices: Evidence from green bonds," Post-Print halshs-02008641, HAL.
    • Handle: RePEc:hal:journl:halshs-02008641
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • 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
    • 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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