Environmental score and bond pricing: it better be good, it better be green

Fabio Fornari, Daniele Pianeselli and Andrea Zaghini

No 3176, Working Paper Series from European Central Bank

Abstract: We provide empirical evidence that the pricing of green bonds tends to be highly sophisticated and based on a two-tiered approach. When buying a green bond, investors do not look only at the presence of a green label, but also consider additional characteristics of the bond that involve the environmental score of the issuer and the soundness of the underlying project. By comparing the yields at issuance of green bonds to those of a matched control sample of conventional bonds, our baseline specification identifies a premium of 16 basis points for the green label alone. Furthermore, when the environmental score of the issuer is in the top tercile of the cross-sectional distribution of such an indicator across the analyzed issuers, the greenium nearly doubles. Green certification and periods of heightened climate uncertainty also significantly affect the size of the greenium. JEL Classification: G12, G15, C21, C58, Q56

Keywords: corporate bonds; ESG scores; green bonds; greenium; sustainable finance (search for similar items in EconPapers)
Date: 2026-01
New Economics Papers: this item is included in nep-fmk
Note: 495651
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263176

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