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Who pays the greenium and why? A decomposition

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  • Fricke, Daniel
  • Meinerding, Christoph

Abstract

The average yield differential between a green and a matched conventional bond ("greenium") amounts to minus 3 basis points. We decompose this greenium along the bonds' ownership structure and document that investment funds, banks and insurance companies pay most of it. Dissecting further, the greenium paid by investment funds (and their clients) is mostly explained by an average level effect, confirming the narrative that these investors have non-pecuniary sustainability preferences. The greenium paid by banks is markedly different and cannot be explained by such preferences. Rather banks overweight specific green bonds with a sizeable greenium, pointing towards an interaction between the greenium and bank-related financial frictions.

Suggested Citation

  • Fricke, Daniel & Meinerding, Christoph, 2024. "Who pays the greenium and why? A decomposition," Discussion Papers 41/2024, Deutsche Bundesbank.
    • Handle: RePEc:zbw:bubdps:305279
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    References listed on IDEAS

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    More about this item

    Keywords

    Green bonds; sustainable investment; greenium; ownership structure; securities holdings;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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