The changing value of the ‘green’ label on the US municipal bond market

Andreas Karpf () and Antoine Mandel
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Andreas Karpf: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: Green bonds are seen as a key instrument to unlock climate finance. While their volume has grown steadily in recent years, the impact of the ‘green' label on the bond market is poorly understood. Here, we investigate the differences between the yield term structures of green and conventional bonds in the US municipal bond market. We show that, although returns on conventional bonds are on average higher than for green bonds, the differences can largely be explained by the fundamental properties of the bonds. Historically, green bonds have been penalized on the municipal market, being traded at lower prices and higher yields than expected by their credit profiles. In recent years, however, the credit quality of municipal green bonds has increased and the premium turned positive. Green bonds are thus becoming an increasingly attractive investment, with scope to bridge the climate finance gap for mitigation and adaptation.

Keywords: Environmemtal economics; Climate change; Economics (search for similar items in EconPapers)
Date: 2018-02
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Citations: View citations in EconPapers (50)

Published in Nature Climate Change, 2018, 8 (2), pp.161-165. ⟨10.1038/s41558-017-0062-0⟩

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Related works:
Journal Article: The changing value of the ‘green’ label on the US municipal bond market (2018)
Working Paper: The changing value of the ‘green’ label on the US municipal bond market (2018)
Working Paper: The changing value of the ‘green’ label on the US municipal bond market (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-01905988

DOI: 10.1038/s41558-017-0062-0

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