Do Green Bonds offer higher yield than conventional bonds?
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Sustainable finance and environmental criteria in investment decisions are becoming increasingly important for both investors and bond issuers. Green Bonds is an emerging financial instrument, and research in this area is highly relevant for today’s investors. This master thesis investigates whether green bonds and conventional bond differ in yield. We study the European bond market, more specifically in France, Germany, and the Eurobond market, utilizing a dataset consisting of 13 891 conventional and green bonds over the period of January 1, 2013 – to December 31, 2021. We estimate a model for risk premium (a difference between bond yield and risk-free rate), where we control for various bond characteristics such as rating. The results show that green bonds offer higher yields than conventional bonds in all the markets; the difference is +51.3 bps in Germany, +35.2 bps in France and +28.4 bps for Eurobonds.