Is there a green premium in the green bond market? Systematic literature review revealing premium determinants

The green bond market is emerging as an impactful financing mechanism in climate change mitigation efforts. Studies investigating this have revealed the notion of a ‘green premium’ or ‘greenium’ within pricing, including insights into influential characteristics and drivers that govern it. However, methodological heterogeneity among these studies has resulted general ambiguity regarding consensus over existence premium. This research addresses gap through systematic literature review with aim establishing on existence, nonexistence, premium market. examines published between 2007 2019. A ranking most likely to exhibit organised, framework driving factors. findings confirm 56% primary 70% secondary studies, particularly for those bonds are government issued, investment grade, follow defined governance reporting procedures. varies widely market; however, average greenium −1 −9 basis points observed. Overall, our highlight crucial role strengthening environmental preferences amongst participants; implications pricing theory, by suggesting future should consider noneconomic motives investors, such preferences; and, growth catalyst towards efforts globally.