Green is the new black

Alessandro Moro () and Andrea Zaghini

No 1538, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Donald Trump's re-election and the United States' renewed withdrawal from the Paris Agreement marked a deterioration in the US green bond market: the share of green bonds in the US market dropped from 1.7 per cent in the pre-Trump period to just 0.6 per cent thereafter. Using a difference-in-differences approach, we estimate a decline of 4.4-6.0 percentage points in the probability of issuing green bonds and a reduction of 20-28 million USD in monthly green bond issuance per issuer. At the same time, the greenium - the typically negative yield spread between green and conventional bonds with similar characteristics - turned positive. This shift in the greenium, coupled with a decline in issuance, points to weakened investor demand for green assets, likely driven by both reduced environmental concerns and less optimistic outlook for environmentally conscious firms. The impact of Trump's re-election and policies on green bonds was stronger in the US than in other markets, highlighting diverging trajectories in sustainable finance at the international level.

Keywords: sustainable finance; green bonds; greenium; political shocks; Trump's presidency (search for similar items in EconPapers)
JEL-codes: G11 G12 Q51 Q54 Q56 (search for similar items in EconPapers)
Date: 2026-07
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Working Paper: Green is the new black (2026)
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