Does Greenium Exist? A Comparison between Sovereign and Corporate Bonds

Valentina Cioli, Roberto Bianchini, Alessandro Giannozzi and Oliviero Roggi

International Journal of Business and Management, 2024, vol. 19, issue 6, 251

Abstract: Recent studies suggest that people when making investment decisions, evaluate risk according to their perception of eco-friendly commitment. These studies claim that preference to green investment influences prices and trading behaviour in market settings. Assets perceived greener on average trade at significantly higher prices with different performance between sovereign and corporate green bonds (Ehlers and Packer, 2017). Our paper refers to a sample of 5996 bond at world level divided equally in ordinary bond and green bonds. We tested a set of models to assess this new factor. The results confirm the presence of greenium, but it highlights that corporate bonds’ greenium is higher than sovereign one. Moreover, in developed markets, green bonds tend to exhibit characteristics of a greenium, whereas, in emerging markets, the environmental aspect is still developing. This observation supports the notion that greenium is more pronounced in mature markets with heightened environmental sensitivity. Differently from previous studies, we filter the model for bonds issued during the Covid19 pandemic and not, and the results suggests the presence of a greenium only in normal times (Zerbib, 2019a, 2019b). The analysis contributes to the research on the green bond market and its dynamics. We prove that greenium is not universally present or significant, especially in emerging markets. These insights are relevant for investors and policymakers considering the implications of green finance for sustainable development and climate change mitigation.

Date: 2024
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