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

Abstract

the green bond premium olivier david zerbib(cid:3) y october 17, 2017 latest version here "act so that the effects of your action are compatible with the permanence of genuine human life." hans jonas, 1984. the imperative of responsibility. the university of chicago press. abstract using a matching method, we estimate and analyze the green bond premium, defined as the difference in yield between a green bond and an equivalent synthetic conventional bond. for the sake of accuracy, we focus our analysis on 135 investment grade senior bullet fixed-rate green bonds issued worldwide. the average green bond premium is found to be significantly negative from the green bonds’ issuance date to december 30, 2016, especially in several market segments such as below-aaa eur and usd bonds where the issued amount is greater than usd 100 million (-4 bps and -9 bps, respectively). we then explain this premium by the characteristics of the bonds to reconstitute a green yield curve. we conclude that regulatory and fiscal measures could help to continue feeding the pipeline and create incentive for increasing the volume of green bond issuances. jel classification: c23; g12; g14; g20; q56 keywords: green bonds; low-carbon finance; sustainable finance; asset management; market microstructure; liquidity (cid:3)department of finance, tilburg school of economics and management, and center, tilburg university, p.o. box 90153, 5000 le tilburg, the netherlands. université de lyon, université lyon 1, institut …

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