The Sovereign Greenium: Big Promise but Small Price Effect

Ugo Panizza, Shuyang Shi, Beatrice Weder di Mauro and Mitu Gulati

No 20817, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper investigates the existence, magnitude and drivers of the sovereign greenium: the yield discount on sovereign and quasi-sovereign green bonds relative to conventional bonds. Using a dataset of 332 matched pairs of green and conventional bonds issued between 2014 and 2023 by sovereigns, sovereign-backed agencies, and multilateral development institutions, we analyze secondary-market pricing to capture both cross-sectional and time-varying heterogeneity. We find a small but statistically significant greenium, averaging about 2 basis points for advanced economies and nearly 13 basis points for emerging markets. The greenium is larger for lower-rated issuers and increases when climate transition risks become more salient or when issuers are more vulnerable to climate change. Interaction effects indicate that global awareness of transition risks and domestic climate vulnerability jointly amplify the greenium. While green sovereign bonds trade at lower yields, the resulting fiscal savings are economically modest relative to total interest expenditures. A novel analysis of bond documentation shows that sovereign green bonds contain no binding commitments regarding environmental outcomes, suggesting that the observed greenium reflects symbolic rather than contractual sustainability value.

Keywords: Green bonds; Sovereign debt; Greenium; Sustainable finance; Climate risk (search for similar items in EconPapers)
JEL-codes: G12 G15 H63 Q54 Q56 (search for similar items in EconPapers)
Date: 2025-11
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Working Paper: The Sovereign Greenium: Big Promise but Small Price Effect (2025)
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