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Mark Gilbert

The Explosion in Green Bonds Comes Without a Premium

The growing market for debt to finance environmentally sound projects has a puzzling pricing feature.

Is the promise of green premiums just a lot of hot air?

Is the promise of green premiums just a lot of hot air?

Photographer: Carla Gottgens/Bloomberg
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Given the undoubted and seemingly unbridled enthusiasm for green bonds, why don’t they trade at a premium to their less environmentally friendly counterparts in the debt markets? After a reader posed that question to me a few weeks ago, I’ve struggled to come up with a coherent answer.

The market for green bonds has exploded, with global sales increasing by more than 300% in the past five years to reach $162 billion this year.