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Is it worth it for companies to finance through green bonds? The answer is yes, because there is green. The latter is nothing more than investors are willing to pay a higher price for green bonds than for traditional bonds. However, if there is a second opinion or verification by an independent third-party company, the price difference can fluctuate between 4.5 and 5 basis points. All this comes from a study conducted by four university professors who analyzed 3,000 green bonds. These professors are Marco Ghitti (University of Padua), Gianfranco Gianfrate and Marco Spinelli (Edhec) and Florencio Lopez-de-Silanes (Nber).
Green Bond Market
By the end of 2023, the issuance of green bonds will reach 2.8 trillion US dollars; So far this year, about 300 billion US dollars of green bonds have been issued, according to the Climate Bonds Initiative (CBI), which is a reference for these financial instruments in the financial market. The CBI’s evaluation criteria for these instruments are the most stringent. Also last year, China had the highest issuance of green bonds (83.5 billion US dollars), followed by Germany (67.5 US dollars) and the United States (59.9 US dollars). Italy ranked sixth with 30.3 billion US dollars.
According to some managers specializing in this sector, greenium has fallen significantly compared to the past: about 2-3 basis points. But precisely under certain conditions, these economic benefits can increase.
I learn
exist”UK Account Review“, focusing on the field of bonds issued by companies rather than countries, the four professors specifically analyzed the second-party perspective; independent third-party certifications that rate bond instruments green based on the purpose for which the funds raised are used in the market. Less than half of the bonds analyzed (1,262) were verified by consultants: the professors divided the ratings into dark green, medium green and light green, depending on the green projects funded. From the survey, green bonds rated dark green and medium green are priced higher than traditional bonds. The average value of the so-called Greenium in these cases is exactly 4.75 basis points.
When green doesn’t exist
However, the professors’ analysis reveals a fact, and it is not a small factor. Greenium is paid by investors who issue classic financial ratings, so there are no opinions from agencies such as Standard & Poor’s, Moody’s or Fitch; otherwise, Greenium would practically disappear to zero, and investors would use traditional ratings as a reference.
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