Greenium: Myth or Reality - Do Green Bonds have Lower Yields?

Abstract

This paper investigates the yields of green and brown bonds by employing regression analysis and controlling for the sector and several other conventional variables that may influence yield. The study is conducted on a sample of over 5,000 bonds, with more than 650 green bonds. All bonds are collected from the investment grade government, supranational, and/or corporate bond universe, issued in currency EUR. The study results showed that there is no significant difference between the yields on green and conventional bonds, for the government and corporate sector. For these sectors, green and conventional bonds are seen as perfect substitutes. However, green bonds of supranational institutions seem to have significantly lower yields than conventional bonds.