The effect of regulations and crises in green bond returns: a study of the Greenium since 2018

Abstract

This study focuses on the analysis of the Greenium in the primary market of corporate green bonds since 2018, covering the COVID-19 pandemic and the on-going war in Ukraine. By performing regression analyses based on identified green-vanilla bond pairs with high resemblance, we find an overall Greenium of 8.9 bps throughout our sample period, which intensifies during the pandemic and disappears during the war, and is reflected through the lower relative coupon rates of green bonds. Besides, subset considerations show that different domiciles and sectors can be associated with different Greenium outcomes. Our findings suggest that regulation in isolation might not be enough to foster the green transition, as investors’ beliefs regarding such can have important implications for sustainable investments.