No. 3 - Green Bonds: the Sovereign Issuers' Perspective

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by Raffaele Doronzo, Vittorio Siracusa and Stefano AntonelliMarch 2021

After a brief illustration of sovereign green bonds' features, this paper describes the market evolution and identifies the main benefits and costs for sovereign issuers. The financial performance of these securities is then analysed. In the primary market, the yields at issuance of sovereign green bonds are compared with the yields of similar non-green bonds. In the secondary market, the evolution of the yields of the sovereign green bonds issued by France, Belgium, Ireland and the Netherlands is analysed. The results show that the sovereign green bonds' performance is essentially in line with that of conventional bonds. However, this conclusion does not represent a disincentive to enter this market, since the choice of issuing this kind of security does not simply hinge upon economic convenience valuations: green bonds are a valid tool for mitigating environmental risks and coping with the intergenerational trade-offs implied by climate-related policies.

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