How Large is the Sovereign Greenium?

Abstract

This paper assembles a comprehensive sovereign green bond database and estimates the sovereign greenium. The development of green bond markets has been one of the most important financial breakthroughs in the domain of sustainable finance during the last 15 years. A central benefit associated with green bonds has been that they exhibit a positive green premium (greenium), i.e., a lower yield relative to a similar conventional bond. Yet, issuances at the sovereign level have been relatively recent and not well documented in the literature. We find that green bonds are issued at a relatively small premium (4 basis points on average) in Advanced Economies. Yet, importantly, the greenium is growing over time and is considerably larger (11 basis points on average) for Emerging Market Economies.