Yield Premium or Discount for Labeled Corporate Green Bonds

Open Access
Chang, Brandon Liang
Area of Honors:
Bachelor of Science
Document Type:
Thesis Supervisors:
  • Professor Christoph Hinkelmann, Thesis Supervisor
  • Dr. Brian Spangler Davis, Honors Advisor
  • Green bonds
  • SRI
  • Investing
  • Bonds
  • Corporate
  • Environmental
  • Sustianability
  • Socially responsible
  • Finance
This study examines the yield premium or discount of 14 labeled corporate green bonds. Each green bond’s yield is compared to their respective issuer’s yield curve during the three-month period after the green bond’s announcement date. An issuer’s yield curve is constructed by plotting the yield to convention mid versus modified duration mid for each comparable vanilla bond. The yield premium or discount is the difference between a green bond’s actual yield and a green bond’s expected yield based on a 2nd order polynomial curve fit through the set of comparable vanilla bonds. I find green bond yields do not converge and remain at their issuer’s yield curve three months after the announcement date and green bonds have an average yield discount of -7.9 bps.