A Note on the yield spread of Russian green bonds

Abstract

The global market for ESG financial instruments is actively developing. In Russia, this segment is narrow but has significant prospects for growth. Green bonds serve as a classic ESG financial instrument. There is a hypothesis in literature that investors should be aware of sustainable development goals and accept lower yields when investing in green bonds. The authors tested this hypothesis using Sustainable Development Sector bonds on the Moscow Exchange. Bonds of six issuers that had both green and classic bonds were selected as instruments for the study. The research methods employed included statistical observation, measurement, and comparison. The following results were obtained: (1) the hypothesis was not confirmed, possibly due to the limited sample size and the status of the Russian financial market as an emerging one; (2) it is advisable to introduce tax incentives for individual and institutional investors regarding coupon income and discount of green bonds to actively develop the green bond market; (3) it is necessary to evaluate the effectiveness of tax support for issuers and investors from the government's perspective. The authors also identified challenges in the development of the green bond market and proposed future research directions, including analyzing yield spreads of green bonds on Chinese exchanges, studying green stocks, and mutual fund units.