Rethinking greenium: A quadratic function of yield spread

Chih-Yueh Huang, David Dekker and Dimitrios Christopoulos

Finance Research Letters, 2023, vol. 54, issue C

Abstract: A greenium is the yield discount of a green bond compared to a similar non-green bond. Here we challenge implicit assumptions of a conventional estimator of greenium, which takes the difference between yield spreads of green and non-green bonds. We propose that the greenium should be estimated as a function of non-green bond yield spread. We find that the greenium increases for higher levels of non-green bond yield spread and that this occurs at an increasing rate. Further analysis indicates that at least partially this non-linearity accounts for the effects of credit spread and coupon rate differences.

Keywords: Greenium; Green bond premium; Non-linear; Primary market; Green finance (search for similar items in EconPapers)
JEL-codes: C31 G12 G15 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323000843

DOI: 10.1016/j.frl.2023.103710

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