Are green bonds different from ordinary bonds ? A statistical and quantitative point of view

Cong Ma, Wim Schoutens (), Jan Beirlant, Jan De Spiegeleer, Stephan Höcht and Robert Van Kleeck
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Cong Ma: Department of Mathematics, University of Leuven, School of Mathematics and Statistics, Xi’an Jiaotong University
Wim Schoutens: Department of Mathematics, University of Leuven
Jan Beirlant: Department of Mathematics, University of Leuven
Jan De Spiegeleer: Department of Mathematics, University of Leuven
Stephan Höcht: Assenagon GmbH,
Robert Van Kleeck: Assenagon GmbH,

No 394, Working Paper Research from National Bank of Belgium

Abstract: A green bond is a type of fixed-income security that raises money to invest in predetermined climate and environmental projects, in contrast to conventional debt instruments, where the use of proceeds is not specifed in the terms. The difference in yield between a green bond and an otherwise identical non-green bond of the same issuer and with the same terms is called the greenium. In this paper, we investigate this yield differential between green and conventional bonds. We estimate the greenium on the basis of the bond's asset swap spread (ASW) to investigate whether, consistent with a non-pecuniary motive for holding green assets, green labels are associated with a negative or positive yield gap with respect to ordinary bonds. We calculate and compare several descriptive statistics of green bonds and conventional bonds. Then, several statistical tests are implemented to analyze potential statistical differences between their return distributions. In our analysis, synthetic non-green bonds are constructed via interpolation of the ASW curve of non-green bonds. There are several ndings: (1) From a statistical point of view, no difference between the overall distribution, the mean or median of ASW changes is detected on individual bond pairs. However, our estimation of an overall greenium exhibits a level uctuating near zero over time with an overall average around -7 bps. (2) In addition, we see indications that the volatility of some green-bonds is lower than their non-green counterparts. (3) We see a lagging e ect between the greenium and stress in nancial markets. This could indicate that sustainable investments like green bonds are potentially more immune to systemic crises.

Keywords: Green bond; Greenium; Return Distribution; Fat Tails; Non-normal Distribution (search for similar items in EconPapers)
Pages: 37 pages
Date: 2020-10
New Economics Papers: this item is included in nep-ene and nep-env
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