The pricing of green bonds: Are financial institutions special?

Serena Fatica · Roberto Panzica · Michela Rancan

122 citations0/0 files storedJournal of Financial Stability

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Sustainable Finance and Green Bonds Financial Markets and Investment Strategies Credit Risk and Financial Regulations

Abstract

The financial system plays a major role in the transition to a low-carbon economy. We shed light on this analyzing recent developments in the bond and debt markets. First, we study the pricing of green bonds at issuance. We find a premium for green bonds issued by supranational institutions and corporates but no yield differences in case of issuances by financial institutions. We also document an effect for external review and repeated access to the green bond market. Second, we show that banks that issue green bonds reduce lending towards carbon-intensive sectors, but limited to the loan amounts granted in the role of lead bank in the deal. This mixed evidence about lending suggests that, at the time of issuance, investors may not be able to identify a clear link between the green bond issued by a financial institution and a specific green investment project, which would explain the absence of a green premium for financial issuers.

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2008Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches 2010Does Corporate Social Responsibility Affect the Cost of Capital?2021Corporate green bonds 2009The price of sin: The effects of social norms on markets 2000What Do a Million Observations on Banks Say About the Transmission of Monetary Policy?2010The impact of corporate social responsibility on the cost of bank loans 2014Environmental Externalities and Cost of Capital 2017Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows

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