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We analyse the existence of a green bond premium and find a negative premium of 8 to 14 basis points. We are further interested in the influence of ESG ratings… Click to show full abstract
We analyse the existence of a green bond premium and find a negative premium of 8 to 14 basis points. We are further interested in the influence of ESG ratings on green bonds to determine if investors differentiate between the shade of green. Examining a unique dataset of green bonds, we find a statistically significant influence of ESG ratings on bond spreads. A one-point increase in the weighted average ESG score leads to a decrease in the spread of 6 to 13 basis points. Interestingly, the results are not driven by the environmental friendliness of the green bond issuer, but through the company’s governance.
Journal Title: Journal of Asset Management
Year Published: 2020
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