Investors have long paid a premium to get hold of scarce green bonds, but record issuance might be about to change that.
Bonds sold to fund environmentally-beneficial projects have tended to command higher prices and lower yields than conventional bonds. But that differential — dubbed the greenium — all but vanished in April in the euro corporate bond market.
Comparing option-adjusted credit spreads on an index of euro green bonds with a comparable index of conventional bonds, the Association for Financial Markets in Europe, an industry body, found investors in April paid virtually no premium for holding green corporate bonds. That compares with an average 9 bps premium in 2020.
Estimates vary, depending on methodology, as most green bonds don’t have a directlycomparable conventional peer. But…