Is there a green premium in the green bond market? Systematic literature review revealing premium determinants

MacAskill, Stefen; Roca, Eduardo; Liu, Benjamin; Stewart, Rodney Anthony; Sahin, Oz

doi:10.1016/j.jclepro.2020.124491

Cited by 154 publications

(57 citation statements)

References 37 publications

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“…Finally, [25] could not find statistically significant evidence of the existence of the green premium, even though they used several methodologies such as matching with difference-in-differences and traditional panel techniques (fixed effect). Due to the lack of consensus regarding the green premium, [26] provided a comprehensive literature review on the topic, detailing the methodology of each paper. The authors concluded that the majority of the studies on the topic prove the existence of a green premium in secondary markets.…”

Section: Characteristics and Challenges Of Green Bondsmentioning

confidence: 99%

“…Nowadays, satellite photos can show how much CO 2 is exposed by each company or each project, and it is possible to detect and measure the emissions that would be used to assess the greenness of the projects. Globally, having unified green rating agencies rather than having different standards for each country is required [26,[34][35][36].…”

Section: Policy Implicationsmentioning

confidence: 99%

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Analyzing the Characteristics of Green Bond Markets to Facilitate Green Finance in the Post-COVID-19 World

2021

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The COVID-19 pandemic and the global recessions have reduced the investments in green projects globally that would endanger the achievement of the climate-related goals. Therefore, the post-COVID-19 world needs to adopt the green financial system by introducing new financial instruments. In this regard, green bonds—a type of debt instrument aiming to finance sustainable infrastructure projects—are growing in popularity. While the literature does not contest their effectiveness in fighting climate change, research highlights the high level of risks and low returns associated with this instrument. This study analyzes the green bond markets in different regions with a focus on Asia and the Pacific. It aims to fill the gap in the literature by conducting a comparative study of the characteristics, risks, and returns of green bonds based on the region. The study is based on theoretical background and empirical analysis using the data retrieved from Bloomberg New Energy Finance and the Climate Bonds Initiative. The empirical results are based on several econometrics tests using panel data analysis estimation methods, namely pooled ordinary least squares and generalized least squares random effects estimator. Our findings prove that green bonds in Asia tend to show higher returns but higher risks and higher heterogeneity. Generally, the Asian green bonds market is dominated by the banking sector, representing 60% of all issuance. Given that bonds issued by this sector tend to show lower returns than average, we recommend policies that could increase the rate of return of bonds issued by the banking sector through the use of tax spillover. In the era of post-COVID-19, diversification of issuers, with higher participation from the public sector and de-risking policies, could also be considered.

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Section: Characteristics and Challenges Of Green Bondsmentioning

confidence: 99%

Section: Policy Implicationsmentioning

confidence: 99%

Analyzing the Characteristics of Green Bond Markets to Facilitate Green Finance in the Post-COVID-19 World

2021

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“…China's green asset-backed securities market belongs to the emerging development field of green bonds. Many studies have posited that there is indeed a spread between green bonds and ordinary bonds, which affirms the positive significance of the development of green bonds (Mathews et al, 2010;Yao, 2017;MacAskill et al, 2021). In terms of the research on the factors affecting the issuance interest rate, the mainstream view is that green bonds are similar to traditional bonds.…”

Section: Issuance Pricing and Impact Factors Of Green Asset-backed Securitiesmentioning

confidence: 93%

Financing Advantage of Green Corporate Asset-Backed Securities and its Impact Factors: Evidence in China

2021

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As an innovative green financial tool, green corporate asset-backed securities can effectively solve the problems of narrow financing channels and maturity mismatches for green projects, which can help achieve green and low-carbon development, carbon peaking, and carbon neutrality goals. In this paper, we examine the financing cost advantages of green corporate asset-backed securities and the related impact factors through a combination of empirical and case studies. Empirical research based on the propensity score matching method (PSM) shows that China’s green corporate asset-backed securities issuance rates are 36.97°bps lower than traditional corporate asset-backed securities on average. Credit rating, issuance scale, issuance interest rate, issuance period, and green factors have become the main impact factors of green corporate asset-backed securities financing advantages.

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“…The GB market is growing dramatically in size and market coverage, making up a total of US$257.7 billion in 2019, and approximately 46% has been issued in Europe (Boutabba & Rannou, 2020). The rapid growth of the markets has illustrated a clear, unified momentum towards pro-environmental preferences for ethical investors and bond issuers (MacAskill et al, 2020). As per , the proceeds of GBs are used to fund renewable energy, energy efficiency projects, low-carbon transport, sustainable water, waste and pollution projects.…”

Section: Introductionmentioning

confidence: 99%

Green Bonds and Asset Classes: New Evidence from Time-varying Copula and Transfer Entropy Models

Hung

2021

Global Business Review

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The green bond market has gradually developed worldwide since its debut in 2007 and is viewed as a new form of investment. This study explores the time-varying interdependence between green bond and conventional asset classes, namely Bitcoin price, Standard and Poor’s (S&P) 500, Clean Energy Index, Goldman Sachs Commodity Index (GSCI) Commodity Index and 10-year US bond spanning from May 2013 to December 2019, using both time-varying copula and transfer entropy models. We first focus on static and dynamic correlations between the green bond and other assets, and then identify the causal association among them. The findings suggest that green bonds and other assets have conditional time-varying dependence, and dependence is relatively low. Using transfer entropy, further evidence is gained for causal associations between two variables, which is depicted by two categories like mono-direction and bi-direction. Such nexus reveals the transmitter and receiver of return innovations on these markets. These findings make a considerable contribution to policymakers and environmentally friendly investors with green bond positions.

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Is there a green premium in the green bond market? Systematic literature review revealing premium determinants

Cited by 154 publications

References 37 publications

Analyzing the Characteristics of Green Bond Markets to Facilitate Green Finance in the Post-COVID-19 World

Analyzing the Characteristics of Green Bond Markets to Facilitate Green Finance in the Post-COVID-19 World

Financing Advantage of Green Corporate Asset-Backed Securities and its Impact Factors: Evidence in China

Green Bonds and Asset Classes: New Evidence from Time-varying Copula and Transfer Entropy Models

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