Environmental score and bond pricing: it better be good, it better be green

Fabio Fornari (), Daniele Pianeselli () and Andrea Zaghini
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Fabio Fornari: European Central Bank
Daniele Pianeselli: Bank of Italy

No 1002, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We provide empirical evidence that the pricing of green bonds tends to be highly sophisticated and based on a two-tiered approach. When buying a green bond, investors do not only look at the presence of a green label, but also consider additional characteristics of the bond that involve the issuer's environmental score and the soundness of the underlying project. By comparing the yields at issuance of green bonds to those of a matched control sample of conventional bonds, our baseline specification identifies a premium of 16 basis points for the green label alone. Furthermore, when the issuer's environmental score is in the top tercile of the cross-sectional distribution, the greenium increases by up to double. Green certification and periods of heightened climate uncertainty also significantly affect the size of the greenium.

Keywords: sustainable finance; ESG scores; green bonds; greenium; corporate bonds (search for similar items in EconPapers)
JEL-codes: C21 C58 G12 G15 Q56 (search for similar items in EconPapers)
Date: 2026-03
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https://www.bancaditalia.it/pubblicazioni/qef/2026-1002/QEF_1002_26.pdf (application/pdf)

Related works:
Journal Article: Environmental score and bond pricing: It better be good, it better be green (2026)
Working Paper: Environmental score and bond pricing: it better be good, it better be green (2026)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_1002_26

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