J. Sustainable Finance and Investment. In Review
Impact of ESG Performance and Disclosure on Premiums in the Corporate Bond Market: Evidence from Propensity Score MatchingLi, D, and P. Adriaens
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.
Sustainability scrutiny in the financial markets
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.
Related
Green bond “greenium” fuels sustainable investment in the Great Lakes St. Lawrence regionSustainability scrutiny in the financial markets
