Time-Varying Green Yield Differential
Abstract
We investigate the green yield differential for corporate and government bonds
in the European primary and secondary markets. Additionally, we examine
the development of the green yield differential during the recent COVID-19
and energy crises, aiming to uncover significant changes in investor trading
decisions. We utilize a matching process to identify comparable bonds and
analyze the behavior of the green yield differential using multiple regression
models. Our results suggest that the green yield differential remains insignificant
and inconsistent over the years and has stayed mostly the same following
the recent economic shocks. We conclude that despite being present in the
European market, the green yield differential does not result in substantially
cheaper financing compared to conventional bonds, does not substantially differ
from conventional bond prices, and is sensitive to sustainability-related
events in the European market.
Description
Masteroppgave(MSc) in Master of Science in Business, Finance - Handelshøyskolen BI, 2024