Brown and Green – What’s the Yield in Between?

Abstract: The growing need for green investments has contributed to the increased issuance of green bonds. This research investigates if green bonds are priced differently from conventional bonds by measuring yield spread discrepancies. To estimate the potential yield premium, we perform a matching method and a fixed effect generalized least squares estimator from October 2016 to December 2020. We observe three time periods to account for the impact of the COVID-19 crisis, and our results show a decreasing green bond premium over time. Ultimately, we notice an indication of a no longer existing green bond premium in the real estate sector.