SEMINAIRE LABO - Olivier David ZERBIB, ISFA

Abstract:
Through a matching method, we estimate and analyze the green bond premium, defined as the difference in yield between a green bond and an equivalent synthetic conventional bond expressed as a percentage of the conventional bond yield. For the sake of accuracy, we focus our analysis on 118 green bonds issued worldwide. The average green bond premium is found to be negative from the green bonds' issuance date to August 31, 2016, notably in several segments, such as bonds with a rating strictly below AAA (-6.70%) and those emitted in Euros (-8.47%). The rating is the major driver of the green bond premium: the riskier the bond is, the greater the negative premium will be. The currency in which bonds are issued also contributes to the value of green bond premia. We conclude that regulatory and fiscal measures need to be introduced to keep on increasing the pipeline of green bonds issued and creating incentives for investing in green debt.

Keywords: Green bonds, Low-carbon finance, Sustainable finance, Asset management, Market microstructure, Liquidity, Green macroprudential regulation