Green Bond Pricing: The Greenium and the Effect of Certification

Abstract: We study green bonds, whose proceeds finance climate-friendly projects. After an overview of the rapid development of the global green bond market, we study pricing differences between green and nongreen bonds in the secondary corporate bond market. To calculate the relative price of green bonds, we match green bonds to similar ordinary bonds issued by the same firm. As predicted, we find that green bonds trade at a premium to nongreen bonds. We also find implications that this premium is larger for bonds that have been certified by the Climate Bonds Initiative. This paper adds to the growing body of evidence on green bond pricing dynamics.