ARE INVESTORS RATIONAL PROFIT MAXIMISERS OR DO THEY EXHIBIT A GREEN PREFERENCE? - evidence from the green bond market

Abstract: Green bonds are a new debt investment product that has been developed to stimulate green investments. Using a data set of 28 matching pairs of bonds, the spread differentials between green and conventional bonds of the same issuer was explored in order to find out whether investors exhibit a green preference. The results showed no evidence for the existence of a green preference among investors and indicated instead that green bonds were traded at a discount compared to their conventional counterparts. The results indicate that green bonds are unlikely to be a large catalyst for higher green investment rates as long as there are no targeted policies that accompany them.