The pricing of green bonds: external reviews and the shades of green

Gregor Dorfleitner (), Sebastian Utz and Rongxin Zhang
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Gregor Dorfleitner: University of Regensburg
Sebastian Utz: University of St. Gallen
Rongxin Zhang: University of Regensburg

Review of Managerial Science, 2022, vol. 16, issue 3, No 7, 797-834

Abstract: Abstract We investigate the asset pricing implications of the greenness of bonds. To estimate a green-pricing effect, we determine the ‘green bond premium’ as the difference between the yields of matched conventional and green-labeled bonds. On a cross-sectional average, green bonds experience a statistically significant positive premium. This premium increases with external greenness evaluations, i.e., investors accept premiums of up to 5 basis points for bonds with a substantial environmental agenda. This external validation effect, which is strongest for bonds that are rated dark-green, may offset not incurring information costs, as this effect decreases with increasing age of bonds.

Keywords: Green bond premium; External review; Second-party opinion; Shade of green; Climate finance; Impact investing; 91B76; 91B16; 62P20 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s11846-021-00458-9

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