Funding the Fittest? Pricing of Climate Transition Risk in the Corporate Bond Market

Martijn A. Boermans, Maurice Bun and Yasmine van der Straten

Working Papers from DNB

Abstract: We study whether climate transition risk is priced in corporate bond markets. We assess whether corporate bond investors value companies’ efforts to mitigate climate change by innovating in the green space. By combining global firm-level data on greenhouse emissions and green patents with bond-level holdings data, we provide evidence of a positive transition risk premium, which is significantly lower for emission intensive companies that engage in green innovation. The joint effect of emission intensity and green innovation on bond yield spreads is driven by European investors, specifically institutional investors. Overall, our results indicate that investors care about whether companies are ‘fit’ for the green transition.

Keywords: Climate Change; Climate Transition Risk; Carbon Premium; Greenium; Green Innovation; Green Patents; Institutional Investors; Institutional Ownership (search for similar items in EconPapers)
JEL-codes: G12 G15 G23 Q51 Q54 (search for similar items in EconPapers)
Date: 2024-01
New Economics Papers: this item is included in nep-ene, nep-env, nep-eur, nep-fmk and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:797

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