Abstract
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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Immel, M., Hachenberg, B., Kiesel, F., Schiereck, D. (2022). Green Bonds: Shades of Green and Brown. In: de Jong, M., diBartolomeo, D. (eds) Risks Related to Environmental, Social and Governmental Issues (ESG). Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-18227-3_3
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