The effect of pro-environmental preferences on bond prices: Evidence from green bonds
Zerbib,Olivier David
Zerbib,Olivier David
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.
Description
Date
2019-01
Journal Title
Journal ISSN
Volume Title
Publisher
Research Projects
Organizational Units
Journal Issue
Keywords
green bonds, socially responsible investing, investment preferences, liquidity, C23 - Panel Data Models ; Spatio-temporal Models, G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates, G14 - Information and Market Efficiency ; Event Studies ; Insider Trading, G20 - General, Q56 - Environment and Development ; Environment and Trade ; Sustainability ; Environmental Accounts and Accounting ; Environmental Equity ; Population Growth
Citation
Zerbib, O D 2019, 'The effect of pro-environmental preferences on bond prices: Evidence from green bonds', Journal of Banking & Finance, vol. 98, pp. 39-60. https://doi.org/10.1016/j.jbankfin.2018.10.012
License
info:eu-repo/semantics/closedAccess