REVEALING GREENIUM AND THE ROLE OF THIRD-PARTY CERTIFICATION IN THE PRIMARY MARKET OF CORPORATE SECTOR
One of the issues regarding green bonds to date is related to the difference of views regarding the existence of green bond premiums or greenium in the primary market. Greenium is an event where investors are willing to accept a relatively lower yield on their investment in green bonds compared to equivalent conventional bonds. The existence of greenium can incentivize the corporate sector to further intensify low-carbon business activities. However, based on previous research, there has been no conclusive conclusion.
This study uses the matching method to find a pair of green bonds with conventional bonds that have equivalent criteria and produce 18 bond pairs in the corporate sector. The results of this study indicate that a greenium of -38 bps was found.
Additionally, in further analyzing the factors that determine the variation of greenium, OLS regression was conducted on the specific characteristics of the bonds sampled in this study. The results of the analysis show that third-party certification significantly affects greenium and has a negative relationship. Furthermore, this indicates that third-party certification can reduce the possibility of greenwashing risk, it will further increase the credibility of green bonds in the eyes of investors.
This study also shows that there is a significant influence between Credit Rating and greenium, but it has a positive relationship. The cause of this is that majority of the green bonds sampled in this study have an A rating. A low rating will result in a relatively high green bond yield. Thus, this will reduce the amount of greenium.
Overall, this study concludes that the emergence of greenium is a form of investor support for environmental sustainability. Efforts to preserve it must be planned in the long term to realize a low-emission economy.
Keyword: conventional bond, green bond, greenium, primary market, third-party certification
