Financing the Response to Climate Change: The Pricing and Ownership of U.S. Green Bonds

By Malcolm P. Baker, Daniel Bergstresser, George Serafeim, Jeffrey Wurgler. 2018

383 citations recorded by the source corpus.

We study green bonds, which are bonds whose proceeds are used for environmentally sensitive purposes. After an overview of the U.S. corporate and municipal green bonds markets, we study pricing and ownership patterns using a simple framework that incorporates assets with nonpecuniary utility. As predicted, we find that green municipal bonds are issued at a premium to otherwise similar ordinary bonds. We also confirm that green bonds, particularly small or essentially riskless ones, are more closely held than ordinary bonds. These pricing and ownership effects are strongest for bonds that are externally certified as green.

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Citations in the corpus

The Importance of Climate Risks for Institutional Investors (2020, background): “Further evidence regarding investor responses to climate risks lies in the fact that green bonds have become increasingly important (Baker et al. 2018; Flammer 2018; Tang and Zhang 2018; Zerbib 2019).”
Sustainable investing in equilibrium (2019, unknown): “Baker et al. (2018) and Zerbib (2019) find that green bonds tend to be priced at a premium, offering lower yields than traditional bonds. Both studies argue that the premium is driven by investors’ environmental concerns. Similarly, Chava (2014) and El Ghoul et al. (2011) find that greener firms hav”
Climate Regulatory Risks and Corporate Bonds (2020, unknown): “…to the literature on investor preferences for environmentally friendly securities such as the work on the emerging importance of green bonds (Baker et al., 2018; Flammer, 2015; Tang and Zhang, 2018; Zerbib, 2019), and the relation between ESG and bond prices, such as the research showing a…”
(In)-Credibly Green: Which Bonds Trade at a Green Bond Premium? (2019, unknown): “Yet other studies (e.g., Karpf and Mandel (2017), Hachenberg and Schiereck (2018) or reports from CBI4, or other practitioner's reports) document no signi cant di erence in yields or even higher yields for Green bonds.”
Corporate green bonds (2019, unknown): “Some prior work on green bonds—Karpf and Mandel (2017) , Baker et al. (2018) , and Zerbib (2019) —has focused on the pricing of green bonds and whether green bonds are priced at a premium compared to nongreen (i.e., brown) bonds. These studies focus primarily on municipal bonds (Zerbib’s sample also”
Why do institutional investors buy green bonds: Evidence from a survey of European asset managers (2021, unknown): “…to matched plain vanilla bonds (Karpf and Mandel, 2017), others showing that there is a price premium for green bonds (Bachelet et al., 2019; Baker et al., 2018; Zerbib, 2019), while again other researchers find no significant pricing differential between green bonds and closely matched…”
Green bonds for the Paris agreement and sustainable development goals (2019, background): “Through ordinary least squares (OLS) regressions of after-tax yields and ownership concentration on green bond indicators and controls, Baker et al (2018) found that green bonds are issued at a negative premium and held in higher concentrations among investors, revealing that ‘a subset of investors…”
Dissecting Green Returns (2021, unknown): “For example, Baker et al. (2018) estimate a greenium of about −6 bps in a sample of over 2,000 U.S. municipal and corporate green bonds, whereas Zerbib (2019) estimates −2 bps in a sample of over 1,000 supranational, sub-sovereign and agency, municipal, corporate, financial, and covered green bonds.”