Where's the greenium?
By David F. Larcker, Edward M. Watts. Journal of Accounting & Economics, 2019
456 citations recorded by the source corpus.
This study investigates whether investors are willing to trade-off wealth for societal benefits. We take advantage of unique institutional features of the municipal securities market to provide insight into this question. Since 2013, over $23 billion Green Bonds have been issued to fund eco-friendly projects. Comparing Green securities to nearly identical securities issued for non-Green purposes by the same issuers on the same day, we observe economically identical pricing for Green and non-Green issues. In contrast to a number of recent theoretical and experimental studies, we find that in real market settings investors appear entirely unwilling to forgo wealth to invest in environmentally sustainable projects. When risk and payoffs are held constant, municipal investors view Green and non-Green securities by the same issuer as almost exact substitutes. Thus, the “greenium†is essentially zero.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/791d78a3fbde2ea01ffcb52a70f21fa1633f9d00
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- Christian Leuz
- Hans B. Christensen
- Luzi Hail
- Peter D. Wysocki
- Zhihong Chen
- Omrane Guedhami
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Citations in the corpus
- Mandatory CSR and sustainability reporting: economic analysis and literature review (2019, background): “30 For instance, Hart and Zingales (2017) show that (prosocial) shareholder preferences affect optimal production decisions when externalities of these decisions are not perfectly separable. They drive a wedge between maximizing firm value and shareholder welfare (the latter of which also reflects s”
- Financing the Response to Climate Change: The Pricing and Ownership of U.S. Green Bonds (2018, unknown): “simultaneously with ordinary bonds, they are initially priced the same, as pointed out in contemporaneous work by Larcker and Watts (2020). Nonetheless, we find that even in the Larcker and Watts sample, a differential opens up in the secondary market.”
- Corporate green bonds (2019, unknown): “48 To carefully examine the possibility of a green bond premium (or discount), Larcker and Watts (2020) use a very tight matching methodology, in which they match each green bond to a quasi-identical brown bond of the same issuer.”