Geopolitical turmoil and investor green preference: Evidence from the corporate bond market

Paolo Fiorillo, Antonio Meles, Dario Salerno and Vincenzo Verdoliva

Journal of International Money and Finance, 2024, vol. 149, issue C

Abstract: In this study, we analyze a sample of 1,630 corporate green bonds issued internationally between November 2012 and January 2024 to investigate the yield differences between green and non-green bonds. Our findings reveal a small greenium, particularly significant in the secondary market among carbon-intensive industries, first-time green bond issuers, and riskier issuances. We show that Geopolitical Risk (GPR) significantly influences the greenium in the secondary market, primarily driven by geopolitical acts rather than threats. Additionally, we establish that third-party certifications and corporate exposure to environmental risk are critical in explaining the GPR-greenium relationship. These results underscore the importance of GPR in enhancing investor preference for green bonds, offering important implications for both practice and policy.

Keywords: Green bond; Greenium; Corporate bond market; Geopolitical Risk (search for similar items in EconPapers)
JEL-codes: G12 G32 Q56 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:149:y:2024:i:c:s0261560624002055

DOI: 10.1016/j.jimonfin.2024.103218

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