Pricing Benefits to both issuers and investors for Green Bonds | Climate Bonds Initiative

by | May 20, 2022 | ESG

The Climate Bonds Initiative recently released the latest Green Bond Pricing report, with an assessment of the performance of issuances in the second half of 2021. The report has concluded that longer-term Climate Bonds contain a pricing benefit.

The Greenium remains visible

When a bond is issued with a higher price, and thus has a lower yield compared to outstanding debt, this is known as a new issue concession. New issue concessions are often present in green bonds, a phenomenon we have termed a ‘greenium’ in this reporting series.

Issuers pay less to fund green bonds as the yield is lower, and the greenium can be visualised as it will price inside its own yield curve, mapped through the pricing of vanilla equivalents.

Investors benefits for secondary market performance

The report demonstrates that green bonds experience stronger secondary market performance compared to vanilla equivalents. The research reveals that green bonds achieved a greater magnitude of spread, tightening after both 7 and 28 days when compared to baskets constructed of matched vanilla bonds and indices. The performance of green bonds in the secondary market can help investors to justify the greenium.

Read below to find out more:

Green bonds offer pricing benefits to both issuers and investors | Climate Bonds Initiative

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