1820. The greenium in the European banking sector: an application to the fixed income market
Invited abstract in session TD-9: Insurance and financial innovation for sustainable growth , stream OR in Finance and Insurance .
Tuesday, 14:30-16:00Room: Clarendon SR 2.01
Authors (first author is the speaker)
| 1. | Chiara Pederzoli
|
| Statistics and Quantitative Methods, University Milano-Bicocca and CEFIN | |
| 2. | Edit Rroji
|
| University of Milano-Bicocca | |
| 3. | Anna Maria Fiori
|
| Università di Milano-Bicocca |
Abstract
Consistently with the Sustainable Development Goals of the 2030 Agenda, the green bond market has been growing rapidly in the last few years. Since green bonds should finance projects embedding environmental benefits, environmentally responsible investors should be willing to accept lower financial returns from investing in these bonds. However, in the literature there is no consensus on the premium for greenness, the so called greenium. In particular, there is no clear evidence on the dynamic behaviour of the greenium. To analyse this topic, we consider a set of green and brown bonds issued by financial institutions in the Euro area. We classify bonds according to the ICMA Green Bond Principles. We paired these bonds by minimizing a distance based on rating, currency, bond type (callability), coupon, nominal amount issued, duration and distance from issue date. The resulting dataset of green and brown bonds allows shedding light on the possible existence of a green factor. Based on data from April 2022 to January 2024, we perform a Principal Component Analysis in order to highlight the difference in factors explaining the variability of both returns and variations in OAS of green as opposed to brown bonds. Although common factors explain most of the variability, room is left for a greenness component. This issue deserves further analysis, since the possible existence of a green factor would be relevant in guiding investments.
Keywords
- Sustainable Development
- Finance and Banking
Status: accepted
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