The green advantage: Exploring the convenience of issuing green bonds

Abstract

the green advantage: exploring the convenience of issuing green bonds gianfranco gianfrate (corresponding author) edhec business school gianfranco.gianfrate@edhec.edu mattia peri bocconi university via sarfatti 25 20136 milan italy mattia.peri@studbocconi.it abstract despite the growing relevance green bonds, the actual value of the "green" label on the pricing at issuance of these instruments is unexplored. this paper investigates whether green bonds are priced at premium in comparison to bonds with similar characteristics except for the “greeness”. by adopting a propensity score matching approach, we study 121 senior bullet eurodenominated green bonds issued between 2013 and 2017. we find that green bonds are issued with a statistically significant average negative premium of around 18 basis points. the premium is larger for corporate issuers (21 basis points). also, we show that the premium persists in the secondary market. overall, we show that the market factor a premium in the pricing of green bonds and therefore they are relatively more convenient for issuers. keywords: green bond; sustainability; responsible investment; propensity score; securities issuance. 1. introduction during the 21st conference of parties (cop21) in 2015, the 196 participating countries agreed to “make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development” in order to “hold the increase in the global average temperature to well below 2 °c …

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