Presenter: Magnus Bjørn Frische, Aarhus University

Title: Uncertainty in identification and pricing of green bonds

Abstract: I examine the uncertainty in identification and pricing of green bonds. Green bonds are coveted for investors with green tastes, but the vague definition of green bonds causes uncertainty in the identification of which bonds are truly green. Data providers rely on guidelines from different taxonomies for identifying green bonds and as a consequence diverge on the identification. Both uncertainty in the labelling of green bonds and economy-wide financial uncertainty influence the pricing of green bonds. Increases in financial uncertainty lead a decrease in general yields of US municipal bonds but this yield drop is larger by several factors of magnitude for green bonds. This result is sustained by bonds labelled green by Refinitiv Eikon, but not for bonds labelled by Bloomberg, which is considerably more liberal in identifying green bonds relative to Refinitiv Eikon. I conclude that issuers of green bonds receive the best compensation for the green bond restriction when issuing credible green bonds at a favourable time following increases in financial uncertainty.

Discussant: Anil Kumar

PhD presentation as part of mandatory 1st or 3rd year presentation. The time is extended to one hour; the presenter has 40 minutes for the presentation, 5-10 minutes for the discussant, and 10-15 minutes for questions.

Organizers: Stefan Hirth and Anders Merrild Posselt