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The pricing of green bonds: are financial institutions special?

Serena Fatica (), Roberto Panzica () and Michela Rancan ()
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Roberto Panzica: European Commission – Joint Research Centre, Directorate for Innovation and Growth, Economy and Finance Unit

No 157, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: The financial system plays a major role in the transition to a low-carbon economy. We investigate this issue analyzing the recent developments and challenges in the bond and debt markets. First, we study the pricing of green bonds at issuance. We find a premium when green bonds are issued by supranational institutions and corporates while there is no effect for financial institutions. We also document an effect for external review and repeated access to this market. Second, we investigate lending decisions by banks issuing green bonds. Our results show that these lenders reduce their funding towards more polluting segments of the economy but limited to the amount of loans they granted as lead bank in the deal. This evidence may explain why we do not find a green premium for financial issuers. Yet it also suggests that the banking system may play a much larger role in channelling funds towards low-carbon activities, and thus reducing the environmental risks also for the financial system.

JEL-codes: G12 G20 Q52 Q53 Q54 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-env
Date: 2019-10
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