CBS Research Portal Logo

Green Bonds: An Evaluation of the Financial Performance of Green Bonds Compared to Conventional Bonds

Student thesis : Master thesis

This study provides a comprehensive analysis of green bond performance in the secondary market. As green bonds have increasingly enjoyed popularity among investors and issuers, their market has rapidly grown over recent years. Although research has provided many insights into the green bond market, it has not yet come up with conclusive evidence on the financial performance of green bonds. To drive the knowledge on green bond performance forward and to identify bond attributes that determine the performance in particular, we carry out the following study. It is based on a bond sample that consists of matched green and non-green bonds showing similar characteristics. In this way, we can attribute differences in the bond performance to the green feature. Our findings indicate that green bonds exhibit a Yield-to-Maturity that is 1.3 basis points lower than the one of comparable non-green bonds. As a consequence, green bonds trade at a slight premium. Furthermore, the findings reveal the importance of a bond’s issuer type. The expected Yield-to-Maturity of government green bonds is found to be 2.6 basis points lower than the one of non-green government bonds, whereas the difference is only 1.0 basis points considering corporate bonds. The findings also point towards varying green effects across different bond credit ratings as the green premium paid by investors is estimated to be higher for green bonds of the very high rated segment. According to our results, neither the ESG score nor the issue currency have a significant influence on the green effect. Finally, we investigate how green bonds perform when combined in a portfolio with other asset classes. Examining historical price movements, our results suggest that including green bonds in a widely dispersed portfolio leads to slightly higher diversification benefits than incorporating their non-green counterparts. Overall, we conclude that green bonds are an attractive investment opportunity offering both, a nearly equivalent return as similar traditional investments and a positive environmental impact. Contrarily, issuers do not seem to benefit from access to considerably cheaper financing when issuing green instead of conventional bonds.

Documents & Links

File : application/pdf, 1.66 MB

Type : Text file

Logo

Financial Management. Green Bonds – Success or Failure?

Hammer, Thomas and Siegfried, Patrick (2021): Financial Management. Green Bonds – Success or Failure? Published in: Expert Journal of Finance , Vol. 9, (31 December 2021): pp. 1-8.

This text will explain which role “Green Bonds” play in financing projects and how the green factor is weighted. It will be discussed on how the term “green” can change the price of the bond, if there is a “green premium” and for which group of investors this type of bond is interesting. We will discuss ways to reduce their cost of capital, also considering the risks and on ways on how to improve their conditions. The sustainable and eco-friendly aspects are also highlighted in this text and they might become crucial in future investing, which gives the bond an interesting role.

All papers reproduced by permission. Reproduction and distribution subject to the approval of the copyright owners.

Contact us: [email protected]

This repository has been built using EPrints software .

Logo of the University Library LMU Munich

IMAGES

  1. Green Bonds Definition

    green bonds master thesis

  2. What are Green Bonds? How it Works, Benefits & how to buy

    green bonds master thesis

  3. Green Bonds

    green bonds master thesis

  4. THESIS-GREEN-BONDS.docx

    green bonds master thesis

  5. What is Green Bond?

    green bonds master thesis

  6. What is a Green Bond

    green bonds master thesis

VIDEO

  1. HOW-GREEN BONDS(live)

  2. Do you know about Green Bonds?

  3. How to select eligible projects for green bonds?

  4. Green bonds

  5. IFC Explained: What Are Green Bonds?

  6. Transition bonds: be a future maker

COMMENTS

  1. PDF MBA Master's Thesis The Emergence of Green Bonds as Innovative

    MBA Master's Thesis The Emergence of Green Bonds as Innovative Financial Instruments: A Bibliometrics Analysis from 2008 to 2020 Munich Business School Working Paper ... Munich Business School Working Paper Series, ISSN 2367-3869 . 1 This master thesis was submitted to Munich Business School in July 2020r and super-vised by MBS Prof. Dr ...

  2. PDF Green Bonds issuance and the growth of the market

    Purpose. The purpose of this thesis is to understand the impact of sovereign green bonds issuance on the growth of the market as well as to understand what lies beneath the decision to issue green bonds. To that end, two case studies will be presented, namely the Italian and German sovereign green bond issuance.

  3. PDF MSc Thesis: 'Corporate Green Bonds'

    Master Thesis: 'Unlocking Corporate Green Bonds' Date: December 8, 2021 MSc. Financial Economics, Erasmus School of Economics Abstract This paper provides a quantitative examination of corporate green bonds - bonds whose proceeds are earmarked to finance environmental and climate-friendly projects. It uses a global

  4. PDF Green Bonds

    As described in section 1.4, green bonds emerged as a result of market participants' desire to invest sustainably, and the GBP, CBS, and OSE's green requirements. 61Research conducted by Moody's Investor Services referenced in EU TEG (2019) section 1.3. 62HLEG (2018) 30. 63OECD (2017) 37-38.

  5. PDF Master's thesis: The success of green bonds public policies and other

    Labelled bonds, such as sustainable bonds, green bonds, or development bonds, play a pivotal role in driving the sustainability transition. These fi-nancial instruments are designed to raise capital ... we offer a master's thesis project that investigates the drivers of labelled bonds demand and consequently their greeni-ums, such as public ...

  6. PDF The effect of green bonds on companies: a study of

    Master Thesis [programme Financial Economics] The effect of green bonds on companies: a study of firms' capital structure, performance, and firm value Name student: Alberto Pescara Student ID number: 577588 Supervisor: Antti Yang Second assessor: Dr. Jan Lemmen.

  7. PDF Market Reaction to Green Bond Announcements

    Keywords: Green bonds, Announcement of Issuance, The European markets, Event study, Regression analysis. This master thesis examines the market reaction to the announcement of green bond issuance and determines if the announcement has value-enhancing effects on the company's shares.

  8. PDF Are green bonds delivering on their green promise?

    Master's thesis Subject: Accounting and Finance Author: Kiia Rouhelo Title: Are green bonds delivering on their green promise? A qualitative study exploring the mo- ... 1.3 Structure of the thesis 14 2 Green bonds as a sustainable debt instrument 16 2.1 Sustainable debt instruments 16 2.2 Development of the green bond market 17

  9. PDF Green Bonds

    This master's thesis takes a closer look at the growth in green bonds and attempts to make sense of this growth by analyzing different economic aspects of green bonds. The aim of the thesis is to explain the growth in green bonds and to map drivers behind changes in preferences among issuers, investors and regulators. ...

  10. PDF Green Bonds: Exploring the Corporate Greenium

    This master thesis is dedicated to all of them. To my supervisor, Professor Szabolcs, I would like to express my gratitude for the assistance, the advice and the patience to lead someone who at times found herself lost. Thank you for all the help. ... Green bonds appeared in financial markets as a way to materialize both issuers' and ...

  11. PDF Green Bonds and Renewable Energy: A Proposal for a Green Bond Program

    Green Bonds and Renewable Energy: A Proposal for a Green Bond Program in Alberta (Master's thesis, University of Calgary, Calgary, Canada). Retrieved from https://prism.ucalgary.ca.

  12. PDF A comparative study on the financial performance of green bonds and

    The descriptive statistics suggest that the Green bonds sample, with an average yield-to-maturity of 4.16% seems to outperform the conventional sample by about 0.04% on average. Conventionals do show a standard de-viation of 4.81% while the one of green bonds amounts to 10.52%.

  13. PDF Equity Market Reaction to Green Bond Issuance Announcement

    Master's thesis Subject: Accounting and Finance Author: Arttu Vuokko Title: Equity Market Reaction to Green Bond Issuance Announcement: Global Empirical Evidence of Corporate Green Bonds in 2013-2021 Supervisor: professor Mika Vaihekoski Number of pages: 71 pages + appendices 2 pages Date: 15.2.2023 Sustainable development (SD) is becoming increasingly prominent in business and finance, and

  14. PDF Green Bonds: Lower Returns or Higher Responsibility?

    Master Thesis Green Bonds: Lower Returns or Higher Responsibility? ... green bond market shows a rapid growth in the last years, in which investors see an opportunity for more responsible green funding (Mandel, 2015; Schroders, 2015; Kochetygova & Jauhari, 2014). This can be better seen in Figure 1, which also displays a higher participation in ...

  15. Green Bonds: An Evaluation of the Financial Performance of Green Bonds

    Student thesis: Master thesis. Abstract. This study provides a comprehensive analysis of green bond performance in the secondary market. As green bonds have increasingly enjoyed popularity among investors and issuers, their market has rapidly grown over recent years. Although research has provided many insights into the green bond market, it ...

  16. PDF The Green Bond Premium in The European Market

    bonds' yields with a fixed effects panel regression to estimate the green bond premium. This thesis was able to identify a green bond premium of -2.0 basis points in the overall sample, as well as premia of other magnitudes in multiple subsamples, including Euro-denominated bonds (-0.2 bps), Eurobonds (-3.5 bps), and bonds issued in the financial

  17. PDF Does the valuation effect of a green bond issuance differ between

    This thesis focuses on green bonds, a fixed-income financial instrument that was devel-oped and first-time issued in 2007. After a quiet start, the market has grown promptly since the first corporate green bond issuance in 2013. The market size is currently (1 trillion dollars) and the number is expected to continue its exponential growth as green

  18. PDF Green Bonds in the Norwegian and Swedish Market

    The topic "Green Bonds" was suggested by Entra ASA. Both re-searchers found this relatively new product interesting and wanted to further explore this topic. The thesis is written in collaboration with Entra ASA, who has provided co-supervisors that have been helpful in discussions about the main content of this thesis. This master thesis is ...

  19. PDF The green bond premium and non-financial disclosure

    The green bond premium and non-financial disclosure: ... Master's Thesis Maastricht University Tom Bour 1st Supervisor: prof. dr. Piet Eichholtz 2nd Supervisor: dr. Nils Kok January 2019 . i Abstract This paper identifies the existence of a green bond premium by showing that investors are willing

  20. PDF Green Bonds A beneficial financing form?

    Master of Science thesis Title Green bonds - A beneficial financing form? Author(s) Daniel Arvidsson Department Master Thesis number Real estate and building economics TRITA-FOB-ByF-MASTER-2017:20 Archive number 478 Supervisor Agnieszka Zalejska Jonsson Keywords Green bonds, financing, CSR, Real Estate Abstract

  21. PDF Green Bond: A Systematic Literature Review for Future Research Agendas

    The authors found that the green bonds issued by ESG rated the issuer's experience as a higher negative premium (between 9 and. 19 bps) compared with the un-rated green bond issuances (between 8 and 14 bps). Moreover, the authors denoted that a higher ESG rating follows a higher negative green bond premium.

  22. Financial Management. Green Bonds

    Abstract. This text will explain which role "Green Bonds" play in financing projects and how the green factor is weighted. It will be discussed on how the term "green" can change the price of the bond, if there is a "green premium" and for which group of investors this type of bond is interesting. We will discuss ways to reduce ...

  23. Full article: Can the green bond market enter a new era under the

    1. Introduction. This paper ascertains whether OP can affect the prospects of green bonds. Energy is the economy's lifeblood; whether it is to maintain stable economic growth or ensure national security, a steady energy supply is required (Sivaram & Saha, Citation 2018).As the "blood of industry", oil plays an extremely vital role in promoting economic growth (Chimhowu et al., Citation ...