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ESG and Green Premiums in Bond Pricing

About the Project

Building models and testing the impact of ESG disclosures and green bond issues across thematic areas and industry sectors on pricing impacts in the primary and secondary markets using statistical models.

In a collaboration with the Great Lakes St. Lawrence Governors and Premiers, we have been analyzing green bond premia in the primary and secondary market for municipal issuances from the eight US Great Lakes States.

Our tools include inference tools such as propensity score matching (PSM). The results from bonds for water, energy, transportation and housing infrastructure show that issuers can lower their cost of borrowing and save up to 23 basis points

The financial materiality of ESG (environmental, social and governance) data on corporate and municipal bonds is funded using a collaboration with Nuveen and and the Smart Infrastructure Center.

While bonds in the S&5 500 index indicate that ESG ratings exhibit a 12 bps discount premium in the primary and secondary market, disclosure of data has a negative effect (bonds are more costly). The implications for municipal bond issuers are significant, however at this time there is no ESG rating for these issuers. Our Nuveen project seeks to build the data models to rate public bonds.


Green bond “greenium” fuels sustainable investment in the Great Lakes St. Lawrence region

Sustainability scrutiny in the financial markets