Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246875 
Year of Publication: 
2021
Series/Report no.: 
CFS Working Paper Series No. 663
Publisher: 
Goethe University Frankfurt, Center for Financial Studies (CFS), Frankfurt a. M.
Abstract: 
As part of the Next Generation EU (NGEU) program, the European Commission has pledged to issue up to EUR 250 billion of the NGEU bonds as green bonds, in order to confirm their commitment to sustainable finance and to support the transition towards a greener Europe. Thereby, the EU is not only entering the green bond market, but also set to become one of the biggest green bond issuers. Consequently, financial market participants are eager to know what to expect from the EU as a new green bond issuer and whether a negative green bond premium, a so-called Greenium, can be expected for the NGEU green bonds. This research paper formulates an expectation in regards to a potential Greenium for the NGEU green bonds, by conducting an interview with 15 sustainable finance experts and analyzing the public green bond market from September 2014 until June 2021, with respect to a potential green bond premium and its underlying drivers. The regression results confirm the existence of a significant Greenium (-0.7 bps) in the public green bond market and that the Greenium increases for supranational issuers with AAA rating, such as the EU. Moreover, the green bond premium is influenced by issuer sector and credit rating, but issue size and modified duration have no significant effect. Overall, the evaluated expert interviews and regression analysis lead to an expected Greenium for the NGEU green bonds of up to -4 bps, with the potential to further increase in the secondary market.
Subjects: 
Sustainable Finance
Green Bonds
Greenium
Next Generation EU
EU Bonds
Environmental
Social and Governance (ESG)
Sustainable Investing
Green Finance
JEL: 
C23
G12
G14
G21
G23
G28
Q56
Document Type: 
Working Paper

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