Searching for 'Greenium'

Evidence of a green pricing premium in the secondary Euro-denominated investment grade corporate bond market

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With the strong development of the green, social and sustainability bond market coming to the fore of socially-responsible fixed income investing, we explore the notion of the "greenium", the supposedly green pricing premium, amongst senior Euro-denominated investment grade corporate bonds.

The similarities in the mechanics and profile of green bonds suggest that they should be pari passu with non-green bonds of an identical issuer, seniority, and optionality. Green bonds crucially provide holders with exposure to the credit risk of the issuer (rather than to specific projects), whilst investors are exposed to the activities and targeted, measurable positive impact of specific projects.

This principle of equivalence and assumed flat pricing, however, does not always hold in practice.

Greenium Whitepaper front cover

In this whitepaper, we deconstruct data from iBoxx Global Green, Social and Sustainability Bond index to evaluate and discuss:

  • Theoretical models to justify the existence of greenium
  • Whether greenium, in the aggregate, can be observed, and;
  • Potential bond characteristics affecting the magnitude and distribution of greenium

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