A Renewed Investigation of the Greenium for Green Bonds and Sustainability-Linked Bonds

Abstract

This thesis investigates whether there is a greenium for Green Bonds (GBs) and Sustainability-Linked Bonds (SLBs), by using a conceptual framework of behavioural economics theory. A sample of 396 GBs, 208 SLBs, and 641 CBs was analysed using four ordinary least squares and four fixed effects regressions. Results show no significant indication of a greenium for GBs but do show evidence for the presence of a greenium for SLBs. This indicates that the greenium for GBs has potentially decayed. On the other hand, the results suggest that because of pro-environmental behaviour or irrational heuristics, investors are accepting a lower yield for SLBs compared to CBs. Due to limitations in both the sampling process and model specification, these results should be interpreted with caution. Further research on the noneconomic motives for investors to invest in GBs and SLBs is necessary to get a better understanding of the causes of these results.