In a potential blow to the green bonds market, researchers at the EU’s financial markets and securities regulator have found nothing to confirm there really is a “greenium” on sustainable debt – jargon for the extra investor interest in green financial products that allows issuers to raise money more cheaply.

The European Securities and Markets Authority (ESMA) published an article on Friday, entitled “The European sustainable debt market – do issuers benefit from an ESG pricing effect?” analysing the existence of an ESG pricing effect on different types of sustainable-labelled debt instruments.

In conclusion, researchers at the Paris-based agency wrote: “Our empirical results confirm our expectations regarding the standard factors that drive bond prices and yields – i.e. credit risk, maturity and liquidity risk – and the explanatory power of our models is encouraging.

“However, our results do not confirm the systematic existence of a greenium for neither sustainable bond category, regardless of the model and supported by a satisfactory r-squared across our entire model,” they wrote.

In statistics, “r-squared” shows how well the data fit the regression model.

But another finding in the new ESMA study was that ESG bond issuers had benefitted from yield discounts in the past “due to their issuer characteristics”.

ESMA said there were many different possible reasons for that, including first-mover advantage and increased concern about greenwashing.

“We also find that this trend does not continue into the present,” the researchers said, adding that issuer-based public ESG commitments had not been shown to have any effect on bond prices overall.

From a financial stability perspective, ESMA’s report stated the results were encouraging, because price divergences between sustainable and conventional debt instruments appeared, from the new work, to stem from the same fundamental risk factors – for example an issuer’s creditworthiness – and were not just driven by a bond’s ESG status.

“Yet, in consideration of the vast need to support the transition towards a more sustainable economy, the results also indicate a limited appetite in the market to forego returns in support of this objective,” the researchers said.

This, they said, opened up further avenues for research, suggesting it was worth scrutinising the conditions under which investors might be more willing to opt for sustainable investment instruments and sacrifice returns – or assessing the margin of missed profits investors would be ready to accept to support the sustainable transition.

ESMA’s researchers warned against seeing the results as a general rejection of the possibility of pricing advantages related to sustainable debt instruments – because that market was still evolving, and the analysis had only looked at a specific sample of outstanding bonds.

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