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 "greenium", the supposed green pricing premium of green bonds amongst their conventional senior Euro-denominated investment grade corporate bond peers.
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. This principle of equivalence and assumed flat pricing, however, does not always hold in practice.
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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