1 Introduction
2 The green bond market: institutional details
2.1 Green bond labels
2.2 Different external green bond reviewers
Shade | CICERO | Vigeo | ISS-Oekom | Sustainalytics |
---|---|---|---|---|
Dark green | Dark green | Reasonable | Excellent | Leader |
Good | Outperformer | |||
Medium green | Medium green | Moderate | Medium | Average performer |
Light green | ||||
Brown | Brown | Weak | Poor | Underperformer |
Laggard | ||||
No shade | No clear shade | No clear shade | No clear shade | No clear shade |
3 Literature review and hypotheses development
3.1 The green bond premium and its determinants
3.2 Hypotheses development
4 Data description
4.1 The green bond dataset
4.2 Matching conventional and green bonds
4.3 Liquidity adjustment
4.4 Sample and descriptive statistics
Variable | Obs. | Mean | Std. | Min | Median | Max |
---|---|---|---|---|---|---|
Panel: time-variant | ||||||
\(\Delta r\) (%) | 92,774 | −0.0012 | 0.1208 | −0.9969 | 0.0012 | 0.9834 |
\(\Delta L\) (%) | 92,774 | −0.0019 | 0.0460 | −0.4477 | 0.0001 | 0.3898 |
gb_yield (%) | 92,774 | 1.6214 | 2.1388 | −0.9720 | 0.9430 | 23.0020 |
maturity (in years) | 92,774 | 4.2459 | 3.0428 | 0.0548 | 3.5863 | 28.8110 |
Panel: time-invariant | ||||||
Maturity\(^{{\mathrm{a}}}\) (in years) | 250 | 6.2407 | 3.2921 | 1.9973 | 5.0055 | 30.0192 |
gb_volume (bn USD) | 250 | 0.4267 | 0.4243 | 0.0018 | 0.3727 | 3.3456 |
cb_volume (bn USD) | 250 | 0.6695 | 0.8690 | 0.0015 | 0.3235 | 5.5760 |
Variable | Obs. | Relative | Variable | Obs. | Relative |
---|---|---|---|---|---|
SPO | CNY | 10 | 4.00 | ||
Yes | 196 | 78.40 | EUR | 72 | 28.80 |
No | 54 | 21.60 | GBP | 3 | 1.20 |
HKD | 1 | 0.40 | |||
Shade | INR | 4 | 1.60 | ||
Dark green | 49 | 19.60 | JPY | 5 | 2.00 |
Medium green | 52 | 20.80 | MXN | 1 | 0.40 |
No shade | 95 | 38.00 | NOK | 6 | 2.40 |
No SPO | 54 | 21.60 | SEK | 48 | 19.20 |
SGD | 1 | 0.40 | |||
Verification | TRY | 3 | 1.20 | ||
Yes | 51 | 20.40 | USD | 52 | 20.80 |
No | 199 | 79.60 | ZAR | 6 | 2.40 |
CBI_certification | issuer_type | ||||
Yes | 17 | 6.80 | Agency | 46 | 18.40 |
No | 233 | 93.20 | Corporate | 47 | 18.80 |
Financial | 67 | 26.80 | |||
green_rating | Municipal | 21 | 8.40 | ||
Yes | 10 | 4.00 | Sovereign | 2 | 0.80 |
No | 240 | 96.00 | Supranational | 67 | 26.80 |
Seniority\(^{{\mathrm{a}}}\) | credit_rating | ||||
MTG | 8 | 3.20 | AAA | 79 | 31.60 |
SEC | 2 | 0.80 | AA\(+\) | 11 | 4.40 |
SR | 203 | 81.20 | AA | 13 | 5.20 |
SRBN | 4 | 1.60 | AA− | 12 | 4.80 |
SRP | 15 | 6.00 | A\(+\) | 15 | 6.00 |
SRSEC | 4 | 1.60 | A | 5 | 2.00 |
UN | 14 | 5.60 | A− | 4 | 1.60 |
BBB\(+\) | 8 | 3.20 | |||
Currency | BBB | 4 | 1.60 | ||
AUD | 23 | 9.20 | BBB− | 4 | 1.60 |
CAD | 7 | 2.80 | NR\(^{{\mathrm{b}}}\) | 95 | 38.00 |
CHF | 8 | 3.20 |
5 Empirical methodology
5.1 Estimating the green bond premium
5.2 Determinants of the green bond premium
6 Results
6.1 The green bond premium
Coef. | Robust SE | |
---|---|---|
\(\Delta L_{it} - \overline{\Delta L_{i}}\) | 0.2882\(^{***}\) | 0.0953 |
\(\overline{\Delta L_{i}}\) | 0.9210\(^{**}\) | 0.3754 |
_cons | 0.0094\(^{**}\) | 0.0039 |
\(N\) | 92,774 | |
Wald \(chi^{2}\) | 43.7700 | |
Prob > \(chi^{2}\) | 0.0000 | |
Rho | 0.4968 |
6.2 Shades of green and time-variant green bond premium
Hybrid1 | Hybrid2 | Hybrid3 | Hybrid4 | ||
---|---|---|---|---|---|
H2 | SPO | 0.0355\(^{***}\) (0.0126) | 0.0425\(^{*}\) (0.0231) | ||
Verification | 0.0246\(^{**}\) (0.0099) | 0.0248\(^{**}\) (0.0100) | 0.0255\(^{***}\) (0.0095) | ||
CBI_certification | −0.0257 (0.0261) | −0.0260 (0.0258) | −0.0244 (0.0264) | ||
green_rating | 0.0179 (0.0120) | 0.0187 (0.0116) | 0.0210\(^{*}\) (0.0112) | ||
H3 | \(d\_maturity*{\overline{SPO}}\) | −0.0070 (0.0062) | |||
\(m\_maturity*{\overline{SPO}}\) | 0.0018 (0.0037) | ||||
H4 | dark_green | 0.0536\(^{***}\) (0.0157) | 0.0227\(^{**}\) (0.0094) | ||
medium_green | 0.0376\(^{***}\) (0.0145) | 0.0076 (0.0093) | |||
no_shade | 0.0330\(^{***}\) (0.0126) | ||||
Controls | d_maturity | 0.0076 (0.0052) | 0.0103\(^{*}\) (0.0055) | 0.0076 (0.0052) | 0.0131\(^{**}\) (0.0061) |
d_gb_yield | −0.0257\(^{**}\) (0.0131) | −0.0262\(^{**}\) (0.0131) | −0.0257\(^{**}\) (0.0131) | −0.0366\(^{**}\) (0.0156) | |
m_maturity | −0.0026\(^{**}\) (0.0012) | −0.0029\(^{**}\) (0.0014) | −0.0026\(^{**}\) (0.0012) | −0.0024\(^{*}\) (0.0013) | |
m_gb_yield | 0.0112 (0.0071) | 0.0113 (0.0072) | 0.0100 (0.0076) | 0.0151 (0.0096) | |
gb_volume | −0.0173 (0.0139) | −0.0168 (0.0142) | −0.0152 (0.0131) | −0.0245\(^{*}\) (0.0142) | |
issuer_type | agency | −0.0175\(^{*}\) (0.0098) | −0.0186\(^{*}\) (0.0100) | −0.0161 (0.0106) | 0.0013 (0.0122) |
Financial | 0.0327\(^{**}\) (0.0163) | 0.0326\(^{**}\) (0.0163) | 0.0343\(^{**}\) (0.0161) | 0.0340\(^{**}\) (0.0171) | |
Municipal | −0.0067 (0.0109) | −0.0075 (0.0112) | −0.0067 (0.0109) | 0.0020 (0.0104) | |
Sovereign | 0.0185 (0.0376) | 0.0175 (0.0373) | 0.0297 (0.0372) | 0.0527 (0.0381) | |
Supranational | −0.0041 (0.0100) | −0.0048 (0.0103) | 0.0032 (0.0110) | 0.0004 (0.0127) | |
credit_rating | AAA | 0.0745\(^{***}\) (0.0269) | 0.0748\(^{***}\) (0.0270) | 0.0676\(^{**}\) (0.0270) | 0.0376 (0.0284) |
AA\(+\) | 0.0573\(^{*}\) (0.0295) | 0.0574\(^{*}\) (0.0296) | 0.0551\(^{*}\) (0.0299) | 0.0262 (0.0278) | |
AA | 0.0023 (0.0221) | 0.0027 (0.0223) | −0.0029 (0.0238) | −0.0001 (0.0240) | |
AA− | 0.0484 (0.0296) | 0.0482 (0.0297) | 0.0486 (0.0302) | 0.0417 (0.0294) | |
A\(+\) | 0.0106 | 0.0114 | 0.0091 | 0.0248 | |
(0.0357) | (0.0358) | (0.0360) | (0.0398) | ||
A | −0.0055 (0.0380) | −0.0054 (0.0379) | −0.0141 (0.0381) | −0.0104 (0.0414) | |
A− | 0.0976\(^{***}\) (0.0303) | 0.0988\(^{***}\) (0.0313) | 0.0955\(^{***}\) (0.0286) | 0.0786\(^{***}\) (0.0294) | |
BBB\(+\) | 0.0328 (0.0215) | 0.0334 (0.0214) | 0.0321 (0.0218) | 0.0546\(^{**}\) (0.0228) | |
BBB | 0.0137 (0.0209) | 0.0140 (0.0208) | 0.0070 (0.0204) | −0.0055 (0.0244) | |
NR | 0.0381\(^{*}\) (0.0225) | 0.0384\(^{*}\) (0.0225) | 0.0338 (0.0229) | 0.0184 (0.0246) | |
Seniority | Yes | Yes | Yes | Yes | |
Currency | Yes | Yes | Yes | Yes | |
_cons | −0.0442 (0.0404) | −0.0498 (0.0440) | −0.0412 (0.0429) | 0.0206 (0.0443) | |
\(N\) | 92,774 | 92,774 | 92,774 | 68,215 | |
Rho | 0.4971 | 0.4993 | 0.4971 | 0.4871 |
6.3 Additional analyses
Coef. | Robust SE | |
---|---|---|
\(\Delta L_{it} - \overline{\Delta L_{i}}\) | 0.4603\(^{***}\) | 0.1309 |
\(\overline{\Delta L_{i}}\) | 0.8898\(^{***}\) | 0.3364 |
_cons | 0.0065\(^{*}\) | 0.0037 |
\(N\) | 89,285 | |
Wald \(chi^{2}\) | 25.9900 | |
Prob > \(chi^{2}\) | 0.0000 | |
Rho | 0.4917 |
Obs. | Mean | Std. | p-value | Min | Median | Max | |
---|---|---|---|---|---|---|---|
Panel: smaller sample | |||||||
\(\hat{p_{it}}\) | 89,285 | \(-0.0002\) | 0.1058 | 0.4881 | \(-0.9698\) | 0.0024 | 0.9509 |
Panel: Zerbib’s approach | |||||||
\(\hat{p_{i}}\) | 250 | 0.0095 | 0.0820 | 0.0678 | \(-0.4799\) | 0.0031 | 0.6327 |
Hybrid1a | Hybrid2a | Hybrid3a | Hybrid4a | ||
---|---|---|---|---|---|
H2 | SPO | 0.0213\(^{**}\) (0.0103) | 0.0263\(^{*}\) (0.0160) | ||
Verification | 0.0150\(^{*}\) (0.0080) | 0.0151\(^{*}\) (0.0080) | 0.0183\(^{**}\) (0.0078) | ||
CBI_certification | −0.0250 (0.0265) | −0.0251 (0.0263) | −0.0218 (0.0270) | ||
green_rating | 0.0059 (0.0106) | 0.0060 (0.0106) | 0.0127 (0.0107) | ||
H3 | \(d\_maturity*{\overline{SPO}}\) | −0.0076 (0.0063) | |||
\(m\_maturity*{\overline{SPO}}\) | 0.0011 (0.0029) | ||||
H4 | dark_green | 0.0516\(^{***}\) (0.0157) | 0.0383\(^{***}\) (0.0127) | ||
medium_green | 0.0251\(^{**}\) (0.0116) | 0.0112 (0.0091) | |||
no_shade | 0.0178\(^{*}\) (0.0093) | ||||
Controls | d_maturity | 0.0095\(^{*}\) (0.0054) | 0.0124\(^{**}\) (0.0062) | 0.0095\(^{*}\) (0.0054) | 0.0147\(^{**}\) (0.0070) |
d_gb_yield | −0.0236\(^{**}\) (0.0116) | −0.0241\(^{**}\) (0.0119) | −0.0236\(^{**}\) (0.0116) | −0.0325\(^{**}\) (0.0158) | |
m_maturity | −0.0008 (0.0011) | −0.0009 (0.0011) | −0.0006 (0.0011) | 0.0001 (0.0012) | |
m_gb_yield | −0.0241\(^{*}\) (0.0126) | −0.0241\(^{*}\) (0.0127) | −0.0283\(^{**}\) (0.0128) | −0.0400\(^{**}\) (0.0161) | |
gb_volume | −0.0230\(^{**}\) (0.0117) | −0.0227\(^{*}\) (0.0116) | −0.0206\(^{**}\) (0.0103) | −0.0296\(^{**}\) (0.0133) | |
issuer_type | Agency | −0.0200 (0.0126) | −0.0204 (0.0127) | −0.0183 (0.0144) | −0.0134 (0.0166) |
Financial | 0.0241 (0.0167) | 0.0242 (0.0168) | 0.0262 (0.0164) | 0.0257 (0.0174) | |
Municipal | −0.0052 (0.0116) | −0.0056 (0.0119) | −0.0065 (0.0118) | −0.0045 (0.0121) | |
Sovereign | 0.0129 (0.0416) | 0.0128 (0.0416) | 0.0299 (0.0413) | 0.0478 (0.0416) | |
Supranational | −0.0084 (0.0133) | −0.0085 (0.0134) | 0.0038 (0.0130) | 0.0010 (0.0125) | |
credit_rating | AAA | −0.0098 (0.0366) | −0.0099 (0.0365) | −0.0242 (0.0315) | −0.0577\(^{*}\) (0.0341) |
AA\(+\) | −0.0240 (0.0370) | −0.0238 (0.0369) | −0.0286 (0.0325) | −0.0597\(^{*}\) (0.0326) | |
AA | −0.0646\(^{*}\) (0.0359) | −0.0646\(^{*}\) (0.0359) | −0.0754\(^{**}\) (0.0330) | −0.0877\(^{**}\) (0.0354) | |
AA− | −0.0202 (0.0418) | −0.0204 (0.0418) | −0.0207 (0.0374) | −0.0375 (0.0368) | |
A\(+\) | −0.0509 (0.0491) | −0.0504 (0.0490) | −0.0547 (0.0442) | −0.0472 (0.0459) | |
A | −0.0536 (0.0470) | −0.0536 (0.0470) | −0.0702 (0.0468) | −0.0833\(^{*}\) (0.0498) | |
A− | 0.0302 (0.0468) | 0.0308 (0.0470) | 0.0261 (0.0389) | 0.0066 (0.0409) | |
BBB\(+\) | 0.0007 (0.0369) | 0.0009 (0.0368) | −0.0032 (0.0315) | −0.0000 (0.0335) | |
BBB | −0.0327 (0.0343) | −0.0325 (0.0343) | −0.0438 (0.0282) | −0.0548\(^{*}\) (0.0297) | |
NR | −0.0414 (0.0360) | −0.0413 (0.0360) | −0.0495 (0.0309) | −0.0724\(^{**}\) (0.0340) | |
Seniority | Yes | Yes | Yes | Yes | |
Currency | Yes | Yes | Yes | Yes | |
_cons | 0.0985 (0.0755) | 0.0942 (0.0735) | 0.1112 (0.0739) | 0.1771\(^{*}\) (0.0913) | |
\(N\) | 89,285 | 89,285 | 89,285 | 65,962 | |
Rho | 0.4810 | 0.4841 | 0.4763 | 0.4764 |
Hybrid1b | Hybrid2b | Hybrid3b | Hybrid4b | ||
---|---|---|---|---|---|
H2 | SPO | 0.0355\(^{**}\) (0.0163) | 0.0425\(^{*}\) (0.0239) | ||
Verification | 0.0246\(^{**}\) (0.0112) | 0.0248\(^{**}\) (0.0112) | 0.0255\(^{**}\) (0.0111) | ||
CBI_certification | −0.0257 (0.0281) | −0.0260 (0.0278) | −0.0244 (0.0280) | ||
green_rating | 0.0179 (0.0129) | 0.0187 (0.0129) | 0.0210\(^{*}\) (0.0128) | ||
H3 | \(d\_maturity*{\overline{SPO}}\) | −0.0070 (0.0067) | |||
\(m\_maturity*{\overline{SPO}}\) | 0.0018 (0.0034) | ||||
H4 | dark_green | 0.0536\(^{***}\) (0.0194) | 0.0227\(^{*}\) (0.0126) | ||
medium_green | 0.0376\(^{**}\) (0.0175) | 0.0076 (0.0114) | |||
no_shade | 0.0330\(^{**}\) (0.0165) | ||||
Controls | d_maturity | 0.0076\(^{*}\) (0.0042) | 0.0103\(^{**}\) (0.0050) | 0.0076\(^{*}\) (0.0042) | 0.0131\(^{**}\) (0.0054) |
d_gb_yield | \(-\)0.0257\(^{**}\) (0.0111) | −0.0262\(^{**}\) (0.0112) | −0.0257\(^{**}\) (0.0111) | −0.0366\(^{**}\) (0.0146) | |
m_maturity | −0.0026\(^{**}\) (0.0013) | −0.0029\(^{**}\) (0.0013) | −0.0026\(^{**}\) (0.0013) | −0.0024\(^{*}\) (0.0015) | |
m_gb_yield | 0.0112 (0.0131) | 0.0113 (0.0130) | 0.0100 (0.0135) | 0.0151 (0.0156) | |
gb_volume | −0.0173 (0.0118) | −0.0168 (0.0119) | −0.0152 (0.0109) | −0.0245\(^{**}\) (0.0111) | |
issuer_type | Agency | −0.0175 (0.0131) | −0.0186 (0.0133) | −0.0161 (0.0138) | 0.0013 (0.0171) |
Financial | 0.0327\(^{*}\) (0.0176) | 0.0326\(^{*}\) (0.0176) | 0.0343\(^{*}\) (0.0177) | 0.0340\(^{*}\) (0.0187) | |
Municipal | −0.0067 (0.0128) | −0.0075 (0.0132) | −0.0067 (0.0127) | 0.0020 (0.0122) | |
Sovereign | 0.0185 (0.0400) | 0.0175 (0.0399) | 0.0297 (0.0406) | 0.0527 (0.0398) | |
Supranational | −0.0041 (0.0185) | −0.0048 (0.0187) | 0.0032 (0.0184) | 0.0004 (0.0211) | |
credit_rating | AAA | 0.0745\(^{***}\) (0.0274) | 0.0748\(^{***}\) (0.0274) | 0.0676\(^{**}\) (0.0275) | 0.0376 (0.0297) |
AA\(+\) | 0.0573\(^{**}\) (0.0290) | 0.0574\(^{**}\) (0.0292) | 0.0551\(^{*}\) (0.0297) | 0.0262 (0.0279) | |
AA | 0.0023 (0.0225) | 0.0027 (0.0225) | −0.0029 (0.0241) | −0.0001 (0.0251) | |
AA− | 0.0484 (0.0308) | 0.0482 (0.0309) | 0.0486 (0.0315) | 0.0417 (0.0304) | |
A\(+\) | 0.0106 (0.0358) | 0.0114 (0.0358) | 0.0091 (0.0363) | 0.0248 (0.0401) | |
A | −0.0055 (0.0395) | −0.0054 (0.0394) | −0.0141 (0.0402) | −0.0104 (0.0431) | |
A− | 0.0976\(^{***}\) (0.0309) | 0.0988\(^{***}\) (0.0314) | 0.0955\(^{***}\) (0.0294) | 0.0786\(^{***}\) (0.0303) | |
BBB\(+\) | 0.0328 (0.0214) | 0.0334 (0.0213) | 0.0321 (0.0221) | 0.0546\(^{**}\) (0.0240) | |
BBB | 0.0137 (0.0208) | 0.0140 (0.0208) | 0.0070 (0.0204) | −0.0055 (0.0247) | |
NR | 0.0381 (0.0244) | 0.0384 (0.0244) | 0.0338 (0.0249) | 0.0184 (0.0264) | |
Seniority | Yes | Yes | Yes | Yes | |
Currency | Yes | Yes | Yes | Yes | |
_cons | −0.0442 (0.0605) | −0.0498 (0.0607) | −0.0412 (0.0629) | 0.0206 (0.0645) | |
\(N\) | 92,774 | 92,774 | 92,774 | 68,215 | |
Rho | 0.4971 | 0.4993 | 0.4971 | 0.4871 |
OLS1 | OLS2 | OLS3 | ||
---|---|---|---|---|
H2 | SPO | 0.0360\(^{***}\) (0.0131) | ||
Verification | 0.0112 (0.0114) | 0.0119 (0.0112) | ||
CBI_certification | −0.0227 (0.0290) | −0.0213 (0.0294) | ||
green_rating | 0.0171 (0.0107) | 0.0192\(^{*}\) (0.0107) | ||
H4 | dark_green | 0.0521\(^{***}\) (0.0170) | 0.0232\(^{**}\) (0.0105) | |
medium_green | 0.0389\(^{***}\) (0.0143) | 0.0102 (0.0082) | ||
no_shade | 0.0335\(^{**}\) (0.0132) | |||
Controls | gb_volume | −0.0212\(^{*}\) (0.0124) | −0.0189 (0.0118) | −0.0236\(^{**}\) (0.0111) |
issuer_type | Agency | −0.0169 (0.0119) | −0.0155 (0.0127) | −0.0039 (0.0140) |
Financial | 0.0260\(^{*}\) (0.0149) | 0.0273\(^{*}\) (0.0149) | 0.0251 (0.0158) | |
Municipal | −0.0091 (0.0118) | −0.0086 (0.0116) | 0.0005 (0.0099) | |
Sovereign | −0.0163 (0.0446) | −0.0051 (0.0444) | 0.0242 (0.0452) | |
Supranational | −0.0085 (0.0133) | −0.0015 (0.0143) | −0.0080 (0.0138) | |
credit_rating | AAA | 0.0223 (0.0354) | 0.0163 (0.0327) | −0.0154 (0.0315) |
AA\(+\) | −0.0050 (0.0350) | −0.0071 (0.0320) | −0.0335 (0.0294) | |
AA | −0.0471 (0.0344) | −0.0518 (0.0322) | −0.0602\(^{*}\) (0.0313) | |
AA− | −0.0040 (0.0402) | −0.0036 (0.0371) | −0.0166 (0.0360) | |
A\(+\) | −0.0267 (0.0477) | −0.0281 (0.0450) | −0.0166 (0.0472) | |
A | −0.0376 (0.0494) | −0.0452 (0.0485) | −0.0540 (0.0509) | |
A− | 0.0336 (0.0379) | 0.0317 (0.0329) | 0.0195 (0.0329) | |
BBB\(+\) | 0.0094 (0.0353) | 0.0085 (0.0316) | 0.0144 (0.0320) | |
BBB | −0.0261 (0.0321) | −0.0327 (0.0283) | −0.0449 (0.0297) | |
NR | −0.0195 (0.0324) | −0.0231 (0.0290) | −0.0333 (0.0292) | |
Seniority | Yes | Yes | Yes | |
Currency | Yes | Yes | Yes | |
_cons | 0.0182 (0.0399) | 0.0180 (0.0368) | 0.0741\(^{*}\) (0.0442) | |
\(N\) | 250 | 250 | 196 | |
\(R^{2}\) | 0.23 | 0.24 | 0.34 | |
Adjusted \(R^{2}\) | 0.08 | 0.08 | 0.19 |