The European Central Bank published Working Paper No 3176 analysing how green bonds are priced at issuance and finding a two-tiered approach in which investors price both the green label and the issuer’s environmental profile, rather than relying on the label alone. In the authors’ baseline estimates, the green label is associated with a greenium of about 16 basis points, with a materially larger discount when the issuer’s environmental performance is strong and observable. Using issuance data covering around 9,500 green bonds across 73 countries and more than 250,000 conventional bonds spanning 145 nationalities, the paper applies a coarsened exact matching framework to compare like-for-like bonds and estimate yield differentials. It finds the greenium nearly doubles when issuers rank in the top tercile of an environmental performance indicator (the LSEG E-score), while firms with mid or low E-scores do not receive an additional premium beyond the label effect. Third-party certification also increases the greenium, with certified green bonds showing a larger pricing advantage, and the paper reports that social and governance score components are not statistically significant for green bond pricing. Periods of heightened climate uncertainty are associated with a stronger greenium, widening to around 44 basis points and extending temporarily to mid-tier environmental performers, consistent with a “dash-for-green” effect.
European Central Bank 2026-01-22
European Central Bank working paper estimates a 16 basis point green bond label premium that nearly doubles for top environmental score issuers
The European Central Bank's Working Paper No 3176 reveals that green bonds are priced using a two-tiered approach, considering both the green label and the issuer's environmental profile. The study finds a greenium of about 16 basis points, which nearly doubles for issuers with high environmental performance, and increases further with third-party certification and during periods of climate uncertainty.