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2025-09-17 18:58:49
Green Bond Premium: Retail Investors Are a Key Driver. ⑴ Research released by the Bank of France indicates that the eurozone green bond market experienced significant price volatility between 2016 and 2023. Between 2020 and early 2022, the "green premium" (i.e., the price premium of green bonds over comparable conventional bonds) for green bonds strengthened, reaching an average of -3.7 basis points, implying slightly lower issuance costs. ⑵ The study found that retail investor demand is a key factor driving the dynamics of the "green premium." Since mid-2020, the proportion of retail investors holding green bonds has increased significantly, particularly in bank-issued green bonds, directly driving up the economic and statistical significance of the "green premium." When rising interest rates and deteriorating economic conditions weaken demand, the "green premium" disappears. ⑶ The average "green premium" for green bonds held by retail investors reached -6.4 basis points, indicating a preference for green bonds even when expected returns may be lower. ⑷ In addition, the study confirmed investors' preference for green bonds with greater credibility, such as those that have undergone external review or are issued by banks that have committed to environmental goals. The "green premium" for these bonds is more significant, indicating that the market values reliable green investments. For example, the "green premium" for reviewed bonds is -4.1 basis points, while the "green premium" for bonds from committed banks is -5.7 basis points. ⑸ The study emphasizes the importance of clear standards, such as the EU Green Bond Standard, to ensure that green bonds truly promote environmental goals and maintain investor confidence.
