Larcker and Watts (2019)

Larcker, David, and Edward Watts. “Where’s the Greenium?” Working paper (Stanford University), February 2019.

From the authors' abstract: 

“Since 2013, over $23 billion Green Bonds have been issued [in the U.S. municipal bond market] to fund eco-friendly projects. Comparing Green securities to nearly identical securities issued for non-Green purposes by the same issuers on the same day, we observe economically identical pricing for Green and non-Green issues. In contrast to a number of recent theoretical and experimental studies, we find that in real market settings investors appear entirely unwilling to forgo wealth to invest in environmentally sustainable projects. When risk and payoffs are held constant, municipal investors view Green and non-Green securities by the same issuer as almost exact substitutes. Thus, the “greenium” is essentially zero.”

LK comment: Strong paper.

Link: https://www.gsb.stanford.edu/faculty-research/working-papers/wheres-greenium