Authors: Julia Kapraun (Goethe University), Christopher Scheins (Goethe University)
Title: (In)Credibly Green
Abstract: This paper provides an in-depth analysis of the pricing of Green bonds, using both primary and secondary market data. We consider a large global sample of Green bonds and estimate the differences in yields of Green and comparable conventional bonds. At issuance, we find a significant premium of 24 bps for Green bonds, implying that they are issued at higher prices than their conventional counterparts. This premium, however, varies across currencies and issuer types and, particularly, over time. Further, on the secondary market, only bonds issued by governments and supranationals trade at a (small) premium. This indicates the importance of credibility, transparency, and clear standards for the Green bonds market. Finally, we show that it is highly relevant if a Green bond is on a designated “green exchange”, and that the overall sustainability reputation of the issuer matters to investors.