IDEAS home Printed from https://ideas.repec.org/p/lsa/wpaper/wpc40.html
   My bibliography  Save this paper

The Green Bond Premium: A Comparative Analysis

Author

Listed:
  • Mariantonietta Intonti

    (Department of Economics and Finance - University “Aldo Moro†of Bari)

  • Laura Serlenga

    (Department of Economics and Finance - University “Aldo Moro†of Bari)

  • Giovanni Ferri

    (LUMSA University)

  • Matteo De Leonardis

    (Department of Economics and Finance - University “Aldo Moro†of Bari)

Abstract

The paper aims to analyze the presence of a premium on Green Bonds (GBs greenium), financial instruments issued with the specific purpose of contributing to the ecological transition, to facilitate the transformation of our economic system into a low carbon economy, resilient to climate change and resource efficient. The study, starting from the indications provided by Zerbib (2019), was carried out in four steps: the first, to determine the actual existence of a differential between the GB yields compared to a sample of traditional bonds; the second step, based on a panel analysis, to demonstrate that the differential is not due to typical market factors, but rather to the nature of GBs; the third step, characterized by a cross-section analysis, that has the objective to verify whether the characterizing components of the GBs, identified in the qualitative variables of currency, issued quantity, rating and type of issuer, are determinants of the "greenium" factor. Lastly, the evolution of the “greenium constant†over time is calculated to draw some final conclusions. The analysis period is from 2017 to 2022 for a total of 248 weekly observations. The analysis shows that greenium does not seem to be present for all categories of issuers. One of the possible reasons may be linked to the different degree of transparency observed by the different issuers. Finally, considering the time frame of the analysis (2017-2021) we can assert that the premium for GBs has undergone an evolution, over time, due to some triggering factors. The first is certainly the growth of interest in green finance. Secondly, the pandemic (as seen also by estimates made over time and by the presence of a structural break) played its role as protagonist, bringing with it an increase in the value of the differential for both government and corporate bonds, precisely in the period due to the first lockdown, characterized by a strong instability of the markets. Estimates have also shown that, for government bonds, the increase in greenium was not driven by liquidity shocks, unlike corporate bonds. This result reflects the importance that investors attach to the disclosure of information that is provided at the time of issue and during the life of the bond.

Suggested Citation

  • Mariantonietta Intonti & Laura Serlenga & Giovanni Ferri & Matteo De Leonardis, 2022. "The Green Bond Premium: A Comparative Analysis," CERBE Working Papers wpC40, CERBE Center for Relationship Banking and Economics.
    • Handle: RePEc:lsa:wpaper:wpc40
    as

    Download full text from publisher

    File URL: https://repec.lumsa.it/wp/wpC40.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Zerbib, Olivier David, 2019. "The effect of pro-environmental preferences on bond prices: Evidence from green bonds," Journal of Banking & Finance, Elsevier, vol. 98(C), pages 39-60.
    2. Kingsley Y. L. Fong & Craig W. Holden & Charles A. Trzcinka, 2017. "What Are the Best Liquidity Proxies for Global Research?," Review of Finance, European Finance Association, vol. 21(4), pages 1355-1401.
    3. Fatica, Serena & Panzica, Roberto & Rancan, Michela, 2021. "The pricing of green bonds: Are financial institutions special?," Journal of Financial Stability, Elsevier, vol. 54(C).
    4. Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2009. "Flight-to-Quality or Flight-to-Liquidity? Evidence from the Euro-Area Bond Market," The Review of Financial Studies, Society for Financial Studies, vol. 22(3), pages 925-957.
    5. Fatica, Serena & Panzica, Roberto, 2024. "Sustainable investing in times of crisis: Evidence from bond holdings and the COVID-19 pandemic," Journal of Banking & Finance, Elsevier, vol. 166(C).
    6. Raffaele Doronzo & Vittorio Siracusa & Stefano Antonelli, 2021. "Green Bonds: the Sovereign Issuers' Perspective," Mercati, infrastrutture, sistemi di pagamento (Markets, Infrastructures, Payment Systems) 3, Bank of Italy, Directorate General for Markets and Payment System.
    7. Dick-Nielsen, Jens & Feldhütter, Peter & Lando, David, 2012. "Corporate bond liquidity before and after the onset of the subprime crisis," Journal of Financial Economics, Elsevier, vol. 103(3), pages 471-492.
    8. Long Chen & David A. Lesmond & Jason Wei, 2007. "Corporate Yield Spreads and Bond Liquidity," Journal of Finance, American Finance Association, vol. 62(1), pages 119-149, February.
    9. Torsten Ehlers & Frank Packer, 2017. "Green bond finance and certification," BIS Quarterly Review, Bank for International Settlements, September.
    10. Abudy, Menachem Meni & Raviv, Alon, 2016. "How much can illiquidity affect corporate debt yield spread?," Journal of Financial Stability, Elsevier, vol. 25(C), pages 58-69.
    11. repec:oup:rfinst:v:21:y:2017:i:4:p:1355-1401. is not listed on IDEAS
    12. Olivier David Zerbib, 2019. "The effect of pro-environmental preferences on bond prices: Evidence from green bonds," Post-Print halshs-02008641, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Zerbib, Olivier David, 2019. "The effect of pro-environmental preferences on bond prices: Evidence from green bonds," Journal of Banking & Finance, Elsevier, vol. 98(C), pages 39-60.
    3. Fauß, Tobias Friedrich, 2022. "Analysis of Green Bonds," Junior Management Science (JUMS), Junior Management Science e. V., vol. 7(3), pages 668-689.
    4. Karel Janda & Binyi Zhang, 2021. "Attractiveness of Chinese Bonds Financing Climate and Environmental Projects," FFA Working Papers 4.007, Prague University of Economics and Business, revised 26 Apr 2022.
    5. Simeth, Nagihan, 2022. "The value of external reviews in the secondary green bond market," Finance Research Letters, Elsevier, vol. 46(PA).
    6. K. Thomas Liaw, 2020. "Survey of Green Bond Pricing and Investment Performance," JRFM, MDPI, vol. 13(9), pages 1-12, August.
    7. Maria Jua Bachelet & Leonardo Becchetti & Stefano Manfredonia, 2019. "The Green Bonds Premium Puzzle: The Role of Issuer Characteristics and Third-Party Verification," Sustainability, MDPI, vol. 11(4), pages 1-22, February.
    8. Yoshihiro Zenno & Kentaka Aruga, 2023. "Investigating Factors Affecting Institutional Investors’ Green Bond Investments: Cases for Beijing and Shenzhen," Sustainability, MDPI, vol. 15(6), pages 1-16, March.
    9. Danilo Liberati & Giuseppe Marinelli, 2022. "Everything you always wanted to know about green bonds (but were afraid to ask)," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Statistics for Sustainable Finance, volume 56, Bank for International Settlements.
    10. Fatica, Serena & Panzica, Roberto, 2024. "Sustainable investing in times of crisis: Evidence from bond holdings and the COVID-19 pandemic," Journal of Banking & Finance, Elsevier, vol. 166(C).
    11. Hinsche, Isabelle Cathérine, 2021. "A greenium for the next generation EU green bonds: Analysis of a potential green bond premium and its drivers," CFS Working Paper Series 663, Center for Financial Studies (CFS).
    12. Jankovic, Irena & Vasic, Vladimir & Kovacevic, Vlado, 2022. "Does transparency matter? Evidence from panel analysis of the EU government green bonds," Energy Economics, Elsevier, vol. 114(C).
    13. Dorfleitner, Gregor & Eckberg, Jens & Utz, Sebastian, 2023. "Greenness ratings and green bond liquidity," Finance Research Letters, Elsevier, vol. 55(PA).
    14. Ricardo Gimeno & Fernando Sols, 2020. "Incorporating sustainability factors into asset management," Revista de Estabilidad Financiera, Banco de España, issue Autumn.
    15. Piñeiro-Chousa, Juan & López-Cabarcos, M.Ángeles & Caby, Jérôme & Šević, Aleksandar, 2021. "The influence of investor sentiment on the green bond market," Technological Forecasting and Social Change, Elsevier, vol. 162(C).
    16. Ricardo Gimeno & Fernando Sols, 2020. "Incorporating sustainability factors into asset management," Financial Stability Review, Banco de España, issue Autumn.
    17. Martijn Boermans, 2023. "Preferred habitat investors in the green bond market," Working Papers 773, DNB.
    18. Kristin Ulrike Löffler & Aleksandar Petreski & Andreas Stephan, 2021. "Drivers of green bond issuance and new evidence on the “greenium”," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 1-24, March.
    19. Danilo Liberati & Giuseppe Marinelli, 2024. "Was Covid-19 a wake-up call on climate risks? Evidence from the greenium," Questioni di Economia e Finanza (Occasional Papers) 832, Bank of Italy, Economic Research and International Relations Area.
    20. Suk Hyun & Donghyun Park & Shu Tian, 2023. "The price of frequent issuance: the value of information in the green bond market," Economic Change and Restructuring, Springer, vol. 56(5), pages 3041-3063, October.

    More about this item

    Keywords

    Perceived Inequality; Green Bonds; Greenium; Yields; Sustainable Transition;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:lsa:wpaper:wpc40. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Pierluigi Murro (email available below). General contact details of provider: https://edirc.repec.org/data/celumit.html .

    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.