Abstract
We use green bonds as an instrument to identify the effect of non-pecuniary motives, specifically pro-environmental preferences, on bond market prices. We perform a matching method, followed by a two-step regression procedure, to estimate the yield differential between a green bond and a counterfactual conventional bond from July 2013 to December 2017. The results suggest a small negative premium: the yield of a green bond is lower than that of a conventional bond. On average, the premium is -2 basis points for the entire sample and for euro and USD bonds separately. We show that this negative premium is more pronounced for financial and low-rated bonds. The results emphasize the low impact of investors' pro-environmental preferences on bond prices, which does not represent, at this stage, a disincentive for investors to support the expansion of the green bond market.
| Original language | English |
|---|---|
| Title of host publication | Handbook of Quantitative Sustainable Finance |
| Publisher | CRC Press |
| Pages | 410-448 |
| Number of pages | 39 |
| ISBN (Electronic) | 9781032636252 |
| ISBN (Print) | 9781032627922 |
| DOIs | |
| Publication status | Published - 12 Dec 2025 |