Greenium or myth : do green labels affect bond yields in the Nordic markets?
Master thesis
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https://hdl.handle.net/11250/2644900Utgivelsesdato
2019Metadata
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- Master Thesis [4487]
Sammendrag
Estimates show that there is a significant need for more investments into sustainable projects
to meet the climate goals set in the Paris Climate Agreement. Green bonds are a relatively new
type of financial security developed to channelize capital into more environmental-friendly
projects. “Green” financial securities, like green bonds, creates an opportunity for investors to
contribute to the green shift. However, it is unclear whether investors sacrifice some of their
returns when investing in environmental-friendly securities instead of conventional securities.
The objective of our study is to investigate whether investors receive lower yields on their
green bond investments, compared to what they would have earned on identical conventional
bonds. More precise, our study examines if investors receive lower yields from labeled green
bonds compared to what they earn on similar conventional bonds in the Nordic secondary
markets. As previous research on this topic is limited, our study will contribute with new
insight into the Nordic bond markets, which will be valuable for both investors and issuers.
A matching method is used to examine whether investors receive lower yields on Nordic green
bonds compared to conventional bonds. In this method, each green bond is matched with a
similar conventional synthetic bond, which is composed of two conventional bonds. Further,
a fixed effects regression is conducted to investigate whether there is a difference in the
secondary market yield between the green bond and the matched synthetic bond, both for the
whole sample and for various subsamples. A total of 77 Nordic green bonds are matched and
analyzed in this research. Additionally, the estimated greeniums is regressed on different bond
characteristics to capture potential determinants of the green bond premium.
The findings show no statistically significant difference in the yield between green and
conventional bonds when the full sample is analyzed. Hence, there cannot be stated that there
is a greenium for the full sample. However, when the full sample is divided into subsamples,
three of the subsamples have statistically significant greeniums. These subsamples are bonds
issued in SEK, Investment grade bonds, and bonds with an issue amount between 251-500
million SEK. The greeniums found for the respective subsamples are 0.64 bp, 0.60 bp, and 1.2
bp.