Green curve

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Securities - borrowings - pricing - ESG.

A green curve describes the prices of green securities trading in the secondary market, differentiated by their maturities.

Green curve is an abbreviation for green yield curve.


The difference in yield between the green yield curve and the comparable conventional conventional yield curve is known as the "green premium" or greenium.


UK to build out green curve
"It was announced at Budget 2021 that the government will issue its first sovereign green bond - or green gilt - this summer, with a further issuance to follow later in 2021 as the UK looks to build out a 'green curve'."
Green gilt issuance, UK Debt Management Office


Germany to create a green curve
"Germany's green debt plan differs from peers such as France and the Netherlands in that each green bond sold will be matched with a conventional twin...
The structure will show investors the exact cost of going green. Until now, gauging the green premium meant examining an issuer’s regular yield curve to gauge where a hypothetical conventional bond identical to the green bond in question might trade.
'For the first time, we will be able to exactly see what the (green) premium looks like without having to do any maths, except for a simple "minus" calculation, one yield minus the other,' said Christoph Rieger, head of rates and credit research at Commerzbank in Frankfurt...
... accurately gauging relative issuance costs should convince more borrowers of the financial benefits of going green, said Piet Christiansen, chief strategist at Danske Bank in Copenhagen.
So Germany’s structuring of this issue could well be key in drawing more borrowers to the green market.
'When Germany will (create) a green curve, then this is what we will price the green projects off of. So it is really that there will be a benchmark of where green pricing will be, going forward,' Danske’s Christiansen said."
Reuters - Yoruk Bahceli - 2 September 2020


The size of the green premium (greenium) - and even the rationale for its existence - are subject to some debate, as discussed here by the Climate Bonds Initiative.


26 out of 33 green bonds priced on or inside their yield curves
"The new issue premium is the [difference in yield] for a new bond compared to where seasoned bonds from the same issuer are trading in the secondary market at the time of issuance...
There is no reason why a bond being green should impact its price, since green bonds rank pari-passu (on equal footing) with bonds of the same payment rank and issuer.
[However, there] is no credit enhancement to explain pricing differences and issuers of green bonds often incur costs such as Second Party Opinions and Certification, although these are typically negligible.
Green bonds and vanilla equivalents are subject to the same market dynamics..."
Green bond pricing in the primary market - July to December 2020 - Climate Bonds Initiative


See also