Greenium - Revision history

Doug: Layout.

2024-07-29T14:25:22Z

Layout.

← Older revision		Revision as of 14:25, 29 July 2024
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	:<span style="color:#4B0082">'''''Theory and evidence for greenium - UNDP'''''</span>		:<span style="color:#4B0082">'''''Theory and evidence for greenium - United Nations Development Programme (UNDP)'''''</span>

	:"The ‘greenium’, or green premium, refers to pricing benefits based on the logic that investors are willing to pay extra or accept lower yields in exchange for sustainable impact...		:"The ‘greenium’, or green premium, refers to pricing benefits based on the logic that investors are willing to pay extra or accept lower yields in exchange for sustainable impact...

Doug: Layout.

2024-07-29T13:42:57Z

Layout.

← Older revision		Revision as of 13:42, 29 July 2024
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	* [[Green gilt]]		* [[Green gilt]]
	* [[Green halo]]		* [[Green halo]]
			* [[Green story]]
	* [[Issuance]]		* [[Issuance]]
	* [[Issuer]]		* [[Issuer]]

Doug: Add link.

2024-02-06T03:59:09Z

Add link.

← Older revision		Revision as of 03:59, 6 February 2024
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	== See also ==		== See also ==
			* [[Alternative Credit Council]] (ACC)
	* [[Alternative energy]]		* [[Alternative energy]]
	* [[Arbitrage]]		* [[Arbitrage]]
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	[[Category:Accounting,_tax_and_regulation]]		[[Category:Accounting,_tax_and_regulation]]
	[[Category:~~The_business_context~~]]		[[Category:Compliance_and_audit]]
	[[Category:Corporate_finance]]		[[Category:Corporate_finance]]
			[[Category:Financial_products_and_markets]]
			[[Category:Identify_and_assess_risks]]
	[[Category:Investment]]		[[Category:Investment]]
	[[Category:Long_term_funding]]		[[Category:Long_term_funding]]
	~~[[Category:Compliance_and_audit]]~~
	~~[[Category:Ethics]]~~
	~~[[Category:Identify_and_assess_risks]]~~
	[[Category:Manage_risks]]		[[Category:Manage_risks]]
			[[Category:Risk_reporting]]
	[[Category:Risk_frameworks]]		[[Category:Risk_frameworks]]
	[[Category:~~Risk_reporting]]~~		[[Category:The_business_context]]
	~~[[Category:Financial_products_and_markets~~]]

imported>Doug Williamson: Mend link.

2023-01-11T11:29:09Z

Mend link.

← Older revision		Revision as of 11:29, 11 January 2023
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	* [[Arbitrage]]		* [[Arbitrage]]
	* [[Bond]]		* [[Bond]]
	* [[bp]]		* [[Basis point]] (bp)
	* [[Certification]]		* [[Certification]]
	* [[Climate Bonds Initiative]]		* [[Climate Bonds Initiative]]

imported>Doug Williamson: Add link.

2023-01-11T01:19:47Z

Add link.

← Older revision		Revision as of 01:19, 11 January 2023
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	* [[Credit enhancement]]		* [[Credit enhancement]]
	* [[Credit rating]]		* [[Credit rating]]
			* [[EU Green Bond Standard]] (EUGBS)
	* [[European Central Bank]] (ECB)		* [[European Central Bank]] (ECB)
	* [[Fair trade]]		* [[Fair trade]]

imported>Doug Williamson: Layout.

2023-01-10T12:54:50Z

Layout.

← Older revision		Revision as of 12:54, 10 January 2023
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	:<span style="color:#4B0082">'''''Only credible issuers enjoy greenium'''''</span>		:<span style="color:#4B0082">'''''Only credible issuers enjoy greenium - ECB'''''</span>

	:"Our findings show that, first, in the absence of regulatory standards, investors seek credibility of green bonds and issuers.		:"Our findings show that, first, in the absence of regulatory standards, investors seek credibility of green bonds and issuers.
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	:<span style="color:#4B0082">'''''Calculating the 'greenium'? Germany may have the answer'''''</span>		:<span style="color:#4B0082">'''''Calculating the 'greenium'? Germany may have the answer - Reuters'''''</span>

	:"Germany’s debut green bond may finally provide an answer to the question that’s been at the heart of the sustainable investing spree - how much of a premium must investors pay to get hold of green securities?		:"Germany’s debut green bond may finally provide an answer to the question that’s been at the heart of the sustainable investing spree - how much of a premium must investors pay to get hold of green securities?
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	:<span style="color:#4B0082">'''''Tesco enjoys greenium'''''</span>		:<span style="color:#4B0082">'''''Tesco enjoys greenium - ACT'''''</span>

	:"Investor interest in sustainability-linked bonds (SLB) is clear from the ‘greenium’ or pricing benefits issuers have enjoyed.		:"Investor interest in sustainability-linked bonds (SLB) is clear from the ‘greenium’ or pricing benefits issuers have enjoyed.

imported>Doug Williamson: Layout.

2023-01-10T12:53:30Z

Layout.

← Older revision		Revision as of 12:53, 10 January 2023
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	:<span style="color:#4B0082">'''''~~Only credible issuers enjoy~~ greenium'''''</span>		:<span style="color:#4B0082">'''''Theory and evidence for greenium - UNDP'''''</span>

	:"The ‘greenium’, or green premium, refers to pricing benefits based on the logic that investors are willing to pay extra or accept lower yields in exchange for sustainable impact...		:"The ‘greenium’, or green premium, refers to pricing benefits based on the logic that investors are willing to pay extra or accept lower yields in exchange for sustainable impact...
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	:Firstly, a greenium is fundamentally a part of the overall discount factor (or the required rate of return) in the vantage point of the investor. The sustainability factor associated with a thematic bond is a credit positive – such that the issuance of the bond is perceived to improve sustainability. This in turn results in lower overall risk of the issue (issuer). This would warrant a lower yield (higher price) relative to the normal curve (i.e. greenium).		:Firstly, a greenium is fundamentally a part of the overall discount factor (or the required rate of return) in the vantage point of the investor. The sustainability factor associated with a thematic bond is a credit positive – such that the issuance of the bond is perceived to improve sustainability. This in turn results in lower overall risk of the issue (issuer). This would warrant a lower yield (higher price) relative to the normal curve (i.e. greenium).


	:Secondly, the demand and supply equation: higher demand for thematic debt, and in instances where specific funds mandate investments in sustainable instruments, would create excess demand for thematic debt resulting in higher prices for investors, thus lower yields.		:Secondly, the demand and supply equation: higher demand for thematic debt, and in instances where specific funds mandate investments in sustainable instruments, would create excess demand for thematic debt resulting in higher prices for investors, thus lower yields.

	:Thirdly, the mission value or the true appreciation of sustainable features results in a willingness from investors to accept a lower return for a thematic bond.		:Thirdly, the mission value or the true appreciation of sustainable features results in a willingness from investors to accept a lower return for a thematic bond.


	:Irrespective of the circumstances, empirical evidence suggests the existence of greeniums – although this might not always be the case, and its range may differ from a few basis points to more significant values. The spread could perhaps explain the varying degrees of the different vantage points above. For example, for an issuer, signalling a stronger sustainability use of proceeds, greater risk reduction and long-term positive impacts, which also improve operations, could yield a larger greenium, while a less compelling green story could have the opposite effect."		:Irrespective of the circumstances, empirical evidence suggests the existence of greeniums – although this might not always be the case, and its range may differ from a few basis points to more significant values. The spread could perhaps explain the varying degrees of the different vantage points above. For example, for an issuer, signalling a stronger sustainability use of proceeds, greater risk reduction and long-term positive impacts, which also improve operations, could yield a larger greenium, while a less compelling green story could have the opposite effect."

imported>Doug Williamson: Add quote - source - UNDP - https://www.undp.org/blog/identifying-greenium

2023-01-10T12:51:26Z

Add quote - source - UNDP - https://www.undp.org/blog/identifying-greenium

← Older revision		Revision as of 12:51, 10 January 2023
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	In this context, greenium means the saving an issuer can enjoy on its cost of borrowing, because it is issuing a green bond - or other green instrument - rather than a conventional instrument.		In this context, greenium means the saving an issuer can enjoy on its cost of borrowing, because it is issuing a green or thematic bond - or other green or thematic instrument - rather than a conventional instrument.

	The greenium is the amount by which the yield on the green instrument is ''lower'', compared with the conventional instrument.		The greenium is the amount by which the yield on the green instrument is ''lower'', compared with the conventional instrument.
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	There is broad - though not universal - agreement about the existence of a greenium, but divergence of estimates about its size.		There is broad - though not universal - agreement about the existence of a greenium, but divergence of estimates about its size.


			:<span style="color:#4B0082">'''''Only credible issuers enjoy greenium'''''</span>

			:"The ‘greenium’, or green premium, refers to pricing benefits based on the logic that investors are willing to pay extra or accept lower yields in exchange for sustainable impact...

			:There are several technical arguments to support the existence of a favourable ‘greenium’ pricing – defined as the difference in yield between thematic bonds and ordinary bonds of a similar maturity. Among others:

			:Firstly, a greenium is fundamentally a part of the overall discount factor (or the required rate of return) in the vantage point of the investor. The sustainability factor associated with a thematic bond is a credit positive – such that the issuance of the bond is perceived to improve sustainability. This in turn results in lower overall risk of the issue (issuer). This would warrant a lower yield (higher price) relative to the normal curve (i.e. greenium).


			:Secondly, the demand and supply equation: higher demand for thematic debt, and in instances where specific funds mandate investments in sustainable instruments, would create excess demand for thematic debt resulting in higher prices for investors, thus lower yields.

			:Thirdly, the mission value or the true appreciation of sustainable features results in a willingness from investors to accept a lower return for a thematic bond.

			:Irrespective of the circumstances, empirical evidence suggests the existence of greeniums – although this might not always be the case, and its range may differ from a few basis points to more significant values. The spread could perhaps explain the varying degrees of the different vantage points above. For example, for an issuer, signalling a stronger sustainability use of proceeds, greater risk reduction and long-term positive impacts, which also improve operations, could yield a larger greenium, while a less compelling green story could have the opposite effect."

			:''Identifying the ‘greenium’ - How UNDP is contributing to a more efficient cost of capital for developing countries - April 2022.''


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	* [[Tap]]		* [[Tap]]
	* [[Term premium]]		* [[Term premium]]
			* [[Thematic bond]]
			* [[United Nations Development Programme]] (UNDP)
	* [[United Nations Environment Programme Finance Initiative]] (UNEP FI)		* [[United Nations Environment Programme Finance Initiative]] (UNEP FI)
	* [[Vanilla]]		* [[Vanilla]]
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	==External links==		==External links==
			*[https://www.undp.org/blog/identifying-greenium Identifying the ‘greenium’ - How UNDP is contributing to a more efficient cost of capital for developing countries - April 2022]
	*[https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2728~7baba8097e.en.pdf Pricing of green bonds: drivers and dynamics of the greenium - European Central Bank - Working Paper 2728 - September 2022]		*[https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2728~7baba8097e.en.pdf Pricing of green bonds: drivers and dynamics of the greenium - European Central Bank - Working Paper 2728 - September 2022]
	*[https://www.climatebonds.net/files/reports/cbi_pricing_h2_2020_01e.pdf Green bond pricing in the primary market - July to December 2020 - Climate Bonds Initiative]		*[https://www.climatebonds.net/files/reports/cbi_pricing_h2_2020_01e.pdf Green bond pricing in the primary market - July to December 2020 - Climate Bonds Initiative]

imported>Doug Williamson: Update heading.

2023-01-04T14:45:52Z

Update heading.

← Older revision		Revision as of 14:45, 4 January 2023
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	:<span style="color:#4B0082">'''''~~Issuers enjoy~~ greenium'''''</span>		:<span style="color:#4B0082">'''''Tesco enjoys greenium'''''</span>

	:"Investor interest in sustainability-linked bonds (SLB) is clear from the ‘greenium’ or pricing benefits issuers have enjoyed.		:"Investor interest in sustainability-linked bonds (SLB) is clear from the ‘greenium’ or pricing benefits issuers have enjoyed.

imported>Doug Williamson: Add quote - source - ECB - https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2728~7baba8097e.en.pdf

2023-01-04T10:03:18Z

Add quote - source - ECB - https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2728~7baba8097e.en.pdf

← Older revision		Revision as of 10:03, 4 January 2023
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	There is broad - though not universal - agreement about the existence of a greenium, but divergence of estimates about its size.		There is broad - though not universal - agreement about the existence of a greenium, but divergence of estimates about its size.


			:<span style="color:#4B0082">'''''Only credible issuers enjoy greenium'''''</span>

			:"Our findings show that, first, in the absence of regulatory standards, investors seek credibility of green bonds and issuers.

			:In terms of bond credibility, we find that only bonds with external review trade at both a statistically and economically significant greenium.

			:Regarding issuers’ credibility, we define firms in the alternative energy sector as credible as well as banks that signed for the United Nations Environment Programme Finance Initiative (UNEP FI).


			:We find that only green bonds issued by credible companies trade at a statistically and economically significant greenium.

			:The presence of the greenium is still debated in the literature, and our findings contribute to this debate by providing additional evidence on the presence of the greenium in secondary markets, and, particularly, on the importance of credibility for green bonds."

			:''Pricing of green bonds: drivers and dynamics of the greenium - European Central Bank - Working Paper 2728 - September 2022.''


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	== See also ==		== See also ==
			* [[Alternative energy]]
	* [[Arbitrage]]		* [[Arbitrage]]
	* [[Bond]]		* [[Bond]]
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	* [[Climate Bonds Initiative]]		* [[Climate Bonds Initiative]]
	* [[Coupon]]		* [[Coupon]]
			* [[Credibility]]
	* [[Credit enhancement]]		* [[Credit enhancement]]
	* [[Credit rating]]		* [[Credit rating]]
			* [[European Central Bank]] (ECB)
	* [[Fair trade]]		* [[Fair trade]]
	* [[Green]]		* [[Green]]
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	* [[Primary market]]		* [[Primary market]]
	* [[Rank]]		* [[Rank]]
			* [[Regulatory standard]]
	* [[Return]]		* [[Return]]
	* [[Risk premium]]		* [[Risk premium]]
	* [[Seasoned security]]		* [[Seasoned security]]
	* [[Second Party Opinion]]		* [[Second Party Opinion]] (SPO)
	* [[Secondary curve]]		* [[Secondary curve]]
	* [[Secondary market]]		* [[Secondary market]]
	* [[Socium]]		* [[Socium]]
			* [[Statistical significance]]
	* [[Sustainability-linked bond]] (SLB)		* [[Sustainability-linked bond]] (SLB)
	* [[Tap]]		* [[Tap]]
	* [[Term premium]]		* [[Term premium]]
			* [[United Nations Environment Programme Finance Initiative]] (UNEP FI)
	* [[Vanilla]]		* [[Vanilla]]
	* [[Yield curve]]		* [[Yield curve]]
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	==External links==		==External links==
			*[https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2728~7baba8097e.en.pdf Pricing of green bonds: drivers and dynamics of the greenium - European Central Bank - Working Paper 2728 - September 2022]
	*[https://www.climatebonds.net/files/reports/cbi_pricing_h2_2020_01e.pdf Green bond pricing in the primary market - July to December 2020 - Climate Bonds Initiative]		*[https://www.climatebonds.net/files/reports/cbi_pricing_h2_2020_01e.pdf Green bond pricing in the primary market - July to December 2020 - Climate Bonds Initiative]
	*[https://affirmativeim.com/greenium-fact-or-fiction/ Greenium – fact or fiction? - Affirmative Investment Management Partners Limited]		*[https://affirmativeim.com/greenium-fact-or-fiction/ Greenium – fact or fiction? - Affirmative Investment Management Partners Limited]