The Green Bond Premium - does it appear in the European bond market?

Abstract

In this paper, we use general bond information and historical time series data after the expansion of the green bond market in 2016. We estimate the yield differential of the green bonds and their conventional twins followed by a regression analysis to test for the characteristics of the green bond premium. The results show that the green bond premium is distributed around zero and suggests there is no green bond premium. Furthermore, the analysis is extended to test the impact of industries and currencies on the premium. We find a few exceptions to the repeated zero distribution, most likely due to lack of data in our sample. This paper contributes with extensive research on the topic of the green bond premium in the growing green bond market in Europe, in addition to adjustments of the methodology from previous studies.