Practical Applications of Is “Greenness” Priced in the Market? Evidence from Green Bond Issuance in China

Practical Applications

In Is “Greenness” Priced in the Market? Evidence form Green Bond Issuance in China, published in the Summer 2020 issue of The Journal of Alternative Investments, Zhiyao Deng of the London School of Economics and Dragon Yongjun Tang and Yupa Zhang of the University of Hong Kong examine characteristics of the green bond market using a novel dataset from China.

The unique data on green bonds in the Chinese database indicate what proportion of the bond proceeds the issuer intends to use for green initiatives. This detail is absent from the datasets examined in previous studies about other countries, and its inclusion here allows for an investigation into concerns about greenwashing. In particular, after controlling for other variables that impact bond yields, the authors assess whether the degree of “greenness” impacts premiums. Additionally, they can observe the value, reflected in a higher bond price, created by independent companies (known as verifiers) that assess the environmental impact of green bonds.

TOPICS: ESG investing, emerging, portfolio construction, performance measurement