Sustainable bond ‘greeniums’ - the effective discount for an ESG-labelled bond versus a non-ESG benchmark - have seen a significant tightening in the past year, according to new research.
A quarterly report on ESG finance published this week by the Association for Financial Markets in Europe (AFME) found that the greenium of Euro-denominated ESG and green-labelled bonds had tightened by 8bps from April 2020 to April 2021, dropping from 9bps to 1bps.
For corporate green bonds, AFME estimated that the greenium had entirely disappeared, with the greenium for Euro-denominated corporate green bonds close to 0bps, down from more than 20bps in May of 2020.
Julio Suarez, Director of Research at AFME, and author of the report told RI: “We have observed a significant increase in supply of green products.”
“We are aware that some asset managers were struggling to find green compliant instruments, so it is possible they were willing to pay a premium…