RT Journal Article SR Electronic T1 Green Bond Pricing: The Search for Greenium JF The Journal of Alternative Investments FD Institutional Investor Journals SP 49 OP 56 DO 10.3905/jai.2020.1.096 VO 23 IS 1 A1 Candace Partridge A1 Francesca Romana Medda YR 2020 UL https://pm-research.com/content/23/1/49.abstract AB Green bonds are a novel way to help unlock finance for investment in sustainable development. Some issuers and investors are watching this market with keen interest to see whether a green premium—or “greenium”—arises. The current consensus in the literature is that there is a detectable greenium in the secondary markets for corporate and US municipal bonds, but evidence for a greenium at issue is more difficult to detect. The authors provide a summary of the pricing literature and a description of their green municipal bond pricing analyses and then unpack these findings and offer an explanation as to why there is a difference in greenium behavior in the primary and secondary markets.TOPICS: ESG investing, fixed income and structured finance, performance measurementKey Findings• We find that there is no clear pattern in the literature as to whether or not there is a “greenium,” or green premium, although there is a stronger signal for greenium in the secondary markets.• We assert that in the US municipal bond market, this effect arises because of the way that the market is constructed, in that buying a bond at issue is less accessible to smaller investors than buying one in the secondary market.• Without a significant number of price points showing a greenium at issue, green issuers are not incentivized to price their bonds higher for fear of pricing themselves out of the market.