Sustainable finance and green bonds Looking for Greenium evidence in the European market

Abstract

ESG (Environmental, Social and Governance) investments have become increasingly important and the demand for this type of socially conscious investments has increased, impacting not only on retail investors, but larger institutional ones as well. Investing in green bonds means supporting projects related to finance climate and sustainability, and for that getting a green premium or “greenium” as return. It was repeatedly demonstrated by multiple authors that its value is negative with respect to conventional bonds; meaning that investors are willing to accept lower returns and give up wealth in exchange for societal benefits, as investments are linked to green and transparent firms. However, not all investors are willing to forgo profits. The aim of the following dissertation is first to give a clear understanding of the green bond financial product and its dynamic market. Then through the most recent literature it is demonstrated how greenium is still a controversial topic, as counterposed evidence has been gathered. Lastly it is conducted an empirical analysis in order to look for greenium evidence in the European market. In particular the corporate sector is investigated, and a linear regression is performed.