The green bonds: Empirical evidence and implications for sustainability. (15th September 2022)

• Record Type: Journal Article
• Authors: Teti, Emanuele; Baraglia, Icaro; Dallocchio, Maurizio; Mariani, Giovanna
• Is Part Of: Journal of cleaner production. Volume 366(2022)
• Publication Date: 2022-09-15
• Subjects: Factory and trade waste -- Management -- Periodicals; Manufactures -- Environmental aspects -- Periodicals; Déchets industriels -- Gestion -- Périodiques; Usines -- Aspect de l'environnement -- Périodiques; 628.5
• DOI: 10.1016/j.jclepro.2022.132784
• Languages: English
• ISSNs: 0959-6526

Abstract

Abstract: This paper explores the pricing of green bonds in the Italian primary and secondary market and their implications for sustainability by investigating the effect that a green label has on a bond's spread through propensity score matching. From a sample of 420 fixed-rate, euro-denominated bonds priced at on the euro mid-swap from 2014 to the first half of 2021, bonds with a green label are matched with conventional bonds, to assess whether there is a significant difference in spreads between them. The results on the primary market show that green bonds' issuance spread is, on average, 35 to 40 basis points lower than that of comparable conventional bonds at a highly significance level. The spread discount seems to persist regardless of the issuer's sector, even with a difference in the magnitude, being remarkably higher for corporates. On the secondary market, the estimation results confirm the discount impact of the green label on the bonds' market spread, even if this impact is lower than at the issuance. This study aims at giving better coverage of the advantages green bonds are able to generate also in a relatively small and illiquid financial markets. Furthermore, we show that green bonds are effective instruments for issuers to achieve a lower cost of debt to finance green projects and for investors to support the transition to a greener and more sustainable economy. Highlights: Green bonds' issuance spread is, 35 to 40 basis points lower than that of comparable conventional bonds. The spread discount seems to persist regardless of the issuer's market sector. On the secondary market, the estimation results confirm the discount impact of the green label. Discount is more significant for corporate issuers than financial issuers. The discount impact is higher in the primary than in the secondary market.