Abstract
In this paper, I test the prediction that green bonds sell for lower yields than equivalent non-green bonds. The relative performance of such green assets is of fundamental importance to the growing ESG investment industry, but current empirical literature disagrees regarding the existence of a theoretically-predicted green premium. Using methodologies from three prior authors — fixed-effect linear regression from Baker et. al. (2018), Oaxaca-Blinder decomposition from Karpf and Mandel (2018), and pairwise matching method from Larcker and Watts (2019) — I contextualize prior results and extend the estimation to the global market for Multilateral Development Bank (MDB) bonds. Contrary to the divergent results of those authors, I find all three models produce the same conclusion: there is essentially no evidence for a market-wide green bond premium.
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