A greenium is the yield discount of a green bond compared to a similar non-green bond. Here we challenge implicit assumptions of a conventional estimator of greenium, which takes the difference between yield spreads of green and non-green bonds. We propose that the greenium should be estimated as a function of non-green bond yield spread. We find that the greenium increases for higher levels of non-green bond yield spread and that this occurs at an increasing rate. Further analysis indicates that at least partially this non-linearity accounts for the effects of credit spread and coupon rate differences.
|Journal||Finance Research Letters|
|Early online date||17 Feb 2023|
|Publication status||Published - Jun 2023|
- Green bond premium
- Green finance
- Primary market
ASJC Scopus subject areas