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Green bonds: shades of green and brown


We analyse the existence of a green bond premium and find a negative premium of 8 to 14 basis points. We are further interested in the influence of ESG ratings on green bonds to determine if investors differentiate between the shade of green. Examining a unique dataset of green bonds, we find a statistically significant influence of ESG ratings on bond spreads. A one-point increase in the weighted average ESG score leads to a decrease in the spread of 6 to 13 basis points. Interestingly, the results are not driven by the environmental friendliness of the green bond issuer, but through the company’s governance.

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  1. We forgo to use a rating of a comparable bond. Credit ratings lower the information asymmetry between the issuer and the investors, and this might lead to a bias of the results in using comparable bonds.

  2. Floaters are not included in the green bond index as well as the global aggregate index.

  3. Depending on the model, one or three ESG variables are used.

  4. We thank the anonymous reviewer for this alternative explanation.

  5. In an alternative model, we have replaced the USD dummy variable with a variable controlling for bonds issued in Euro. Using this alternative variable does not change the results for the other variables. The results of this alternative model are not shown for reasons of brevity but are upon on request.

  6. For reasons of brevity, the correlation matrix is not shown in the paper but is available upon request.


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Correspondence to Florian Kiesel.

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Immel, M., Hachenberg, B., Kiesel, F. et al. Green bonds: shades of green and brown. J Asset Manag 22, 96–109 (2021).

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  • Green bonds
  • ESG ratings
  • Green bond premium
  • Governance

JEL Classification

  • G12
  • M14
  • Q50