The Price of Being Green

This paper analyzes the funding advantage of green bonds and the determinants of what is referred to as the “greenium” (the “green” premium). To this end, we first separate the greenium from a simultaneously prevailing liquidity premium in empirical yield spreads. For green German government bonds, we determine a greenium of 41.2 to 50.6 basis points. Further panel regressions provide evidence that the greenium benefits from environmental awareness (such as daily aggregated green bond volume, Google search volume, Brent spot, and CO2 allowance prices) and a higher yield to maturity. But it suffers from higher market uncertainty as measured by the marketwide credit spread