Does “Greenium” Exist? Empirical Evidence From China

Expanding greenhouse gas emissions from human activities are not only resulting in global climate change problems,but also bring many negative consequences to human society.Over the years,countries and multinational organizations throughout the world have made gargantuan efforts to accelerate the growth of environment-friendly investments,proposing a framework for the development of green financing,and more and more companies are issuing green bonds as a financial instrument to finance green projects.Unlike traditional bonds,green bonds have the unique feature of stipulating that the funds raised from the bonds must be invested in projects that generate environmental benefits.In January 2016,driven by a series of policies,China’s green bond market was officially launched and rapidly expanded,by 2020,China has already been the second largest issuer of green bonds after the United States.The explosive development of China’s green bond market shows that bond issuers and investors have a pro-environmental preference,and this preference has led to a "greenium".The "greenium" is defined as the difference between the yield of a green bond and that of a traditional bond with common trait;it refers to the inclination of investors to accept a lower yield on green assets than on regular assets.In the primary market,strong demand for green bonds may generate a "greenium",and investors who are unable to obtain a share in the primary market may enter the secondary market,leading to a "greenium" in the secondary market as well.This paper selects green bonds issued in China from January 2016 to June 2020 as the sample and comprehensively examines the existence of green premiums in both the primary and secondary markets.Specifically,this paper firstly uses the propensity score matching method to match green bonds with conventional bonds by the same characteristics;secondly,this paper uses the bond credit spread as the explanatory variable,brings in a dummy variable of green factor,and adds a series of control variables in the panel regression analysis;finally,on the basis of the above models,this paper further adds a dummy variable of third-party certification to investigate whether it affects the green premium.The results of this paper find that the "greenium" exists in both primary and secondary bond markets in China,that is,investors are willing to pay higher prices for green bonds,and that third-party certification is the main factor of green premium.As China’s green bond market starts late,literature about "greenium" in China is very scarce compared to that in the international market.The commitments of this paper is twofold: first,from a perspective of both the primary market of bond issuance and the secondary market of liquidity trading,this paper provides a more comprehensive analysis,correspondingly it selects bond issuance and trading day credit spreads as the explanatory variables,not only limited in the primary market of green bonds.Second,in terms of the research method,this paper uses the propensity score matching method to match ordinary bonds with green bonds where they have the same characteristics except for the "green" attribute,in this way the problem of large sample loss can be avoided thus better ensuring the accuracy of the empirical analysis.