The so-called greenium — the premium on green bond prices — was increasingly visible in both public and private sector bond issuance in the second half of 2020.
The Climate Bonds Initiative modeled yield curves for 33 qualifying green bonds. Where a bond is issued with a higher price, and therefore a lower yield, the bond will price inside its own yield curve — what the analysis labeled the "greenium."
The models found that 19 showed a greenium, seven priced on their curves and five priced with a normal new-issue premium — the extra yield that a buyer receives and a seller pays for a new bond. A report of the analysis said this new issue premium is a "standard feature of the bond market."
Within that sample, nine bonds were dollar-denominated, eight of which priced with a greenium.
The analysis, which monitored the performance of 35 euro-denominated and 19 dollar-denominated green bonds overall, with a total value of $62.5 billion, also considered the inaugural German sovereign green bund issued in September alongside a standard German bund. The German green bund priced with a greenium, maintained a lower yield in the secondary market and showed lower volatility vs. the standard bund.
"The evidence is mounting of the pricing benefits of green, from the German sovereign bonds through to green product in U.S. and European markets," Sean Kidney, CEO at the initiative, said in a comment accompanying the analysis.
"The wider implications, for sovereigns, corporates and banks are increasingly obvious," he said. "With the growth of green bond issuance, particularly in (Asia-Pacific and Latin America,) we expect to see pricing signals emerge over time in regional markets."
