Green is the new black

Alessandro Moro and Andrea Zaghini

No 741, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: Donald Trump's re-election and renewed exit from the Paris Agreement marked a deterioration in the US green bond market. Using a difference-in-differences approach, we estimate a 4.4-6.0 percentage point drop in issuance probability and a USD 20-28 million decline in monthly green-issuance volume per issuer. As a result, 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. At the same time, the greenium - the typically negative yield spread between green and traditional bonds with similar characteristics - turned from negative to positive. This change in the greenium, coupled with reduced issuance, signals weakened investors' 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 shock; Trump's presidency (search for similar items in EconPapers)
JEL-codes: G11 G12 G24 Q51 Q56 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:336812

DOI: 10.2139/ssrn.6247059

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