Green vs Social Bonds: Disentangling Premiums in ESG Investing

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The text provides a comprehensive exploration of green and social bonds within the context of Environmental, Social, and Governance (ESG) investing. It examines the existing premiums associated with these instruments, asserting a surprising lack of correlation between green and social bond premiums. Furthermore, the author delves into the distinct behavioral differences observed between primary and secondary markets, particularly in the context of social bonds.

An Overview of Green and Social Bonds Pricing

In addition, the text investigates variances in bond pricing based on green and social preferences. It finds that the credibility of green projects affects the level of greenium, while the social bond market is less transparent in its pricing strategy. This implies investors perceive social bonds more as conventional instruments than green bonds. The study also highlights significant developments in ESG-oriented policies, emphasizing their influence on the sustainable fixed-income market.

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