Green Bond Premiums in the Chinese Secondary Market

Karel Janda, Anna Kortusova and Binyi Zhang ()
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Anna Kortusova: Institute of Economic Studies, Faculty of Social Sciences, Charles University
Binyi Zhang: Institute of Economic Studies, Faculty of Social Sciences, Charles University

No 2022/20, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Green bonds have gained prominence in China´s capital market as tools that help to fuel the transition to a climate-resilient economy. Although the issuance volume in the Chinese green bond market has been growing rapidly in recent years, the impact of the green label on bond pricing has not been adequately studied. Therefore, this paper investigates whether this newly developed financial instrument offers investors in China an attractive yield compared to other equivalent conventional bonds. By matching green bonds with their conventional counterparts and subsequently applying a fixed-effects estimation, our empirical results reveal a significant green bond yield premium of 1.8 basis points (bps) on average in the Chinese secondary market. In addition to that, we find that CBI certified green bond generate higher yields than self-labelled green bond in the Chinese market. Investors are found to be willing pay a higher price for green bonds issued by environmental, social and governance (ESG) performance-rated issuers. Our results point to some practical implications for investors and policymakers.

Keywords: Green Finance; Green bonds; ESG; China (search for similar items in EconPapers)
Pages: 27 pages
Date: 2022-08, Revised 2022-08
New Economics Papers: this item is included in nep-ban, nep-cna, nep-ene and nep-env
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2022_20

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