Do Investors Pay Yield Premiums On Green Bonds?

Abstract

Global shifts in perspectives on environmental concerns and the growing significance of large-scale sustainabilityprograms have brought the issue of green financing to the fore of financial research. In terms of volume, this area hasdemonstrated high growth rates in various types of capital markets.Unfortunately, few studies exist which explore the yields on green bonds in emerging markets in comparison todeveloped ones. As such, in this paper, we contribute new evidence to the field of green financing and outline severalmajor differences between green issues in these types of capital markets.We study yield premiums of green bonds on a sample of 2,450 green issues and comparable traditional bonds over theperiod from 2008 to March 2020. We contribute to the literature by new empirical evidence on green financing.Our results provide evidence of small but statistically significant negative premiums on green bonds of 23,4%1 comparedto the expected yields for standard issues. We also show that the negative premium on green bonds is more pronouncedin developed markets (- 27%2) than in emerging ones (18%3). Moreover, we provide new evidence on the negativepremium-liquidity relationship. Our research concludes that negative premiums are related to a higher level of liquidity:green bonds have lower bid-ask spreads and a higher level of liquidity than traditional ones.These conclusions can assist investors, potential issuing companies, and public authorities in achieving a betterunderstanding of the current situation of the green bond market in global terms.

The Efficiency of Environmental Project Financing with Green Bonds in the Energy Sector: Evidence from EU Countries

“…The results of this research are mostly consistent with O.D. Zerbib [7], Q. Sheng et al [8], and N. Mikhailova and I. Ivashkovskaya [12], which indicate a 2-8 bps greenium on an extensive sample of placements in Chinese and global primary bond markets. Authors that have based their research on secondary market data [6], [5] have obtained even higher greeniums of 17-20 bps.…”

Russian Companies’ Motivations for Making Green Investments

“…Here, the research interest is formed around the study of foreign experience and comparison of the emerging Russian practice with this experience (Beloshitskiy 2021;Yakovlev and Nikulina 2019). Researchers have analyzed the dynamics of green stocks (Mikhaylova and Ivashkovskaya 2020); bonds and loans (Nikonorov et al 2021;Smirnov 2021); government subsidies and green budget spending (Boltinova 2022); and rules regulating green finance markets (Chernikhovskaya 2022). Recently, another area of research on green financial instruments has emerged: green crypto assets (Baboshkin et al 2022).…”