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Sustainability commitment, environmental achievement, and green bond premium.
Keith Jin Deng Chan1, Vivi Yuwei Liao1
1Division of Environment and Sustainability, The Hong Kong University of Science and Technology, Hong Kong Special Administrative Region of China.
Journal of Environmental Management
|August 8, 2025
Summary
Second-party opinions (SPOs) reveal issuer greenness, influencing green bond premiums (Greenium). Investors value environmental achievement and sustainability commitment, using them to assess green bond credibility and issuer governance.
Area of Science:
- Environmental Finance
- Corporate Social Responsibility
- Sustainable Investment
Background:
- Existing research indicates second-party opinions (SPOs) enhance green bond premiums (Greenium).
- However, the specific information driving this premium remains unclear.
- This study investigates the determinants of Greenium beyond the use of proceeds.
Purpose of the Study:
- To identify novel determinants of the green bond premium (Greenium).
- To analyze the impact of issuer's sustainability commitment and environmental achievement on Greenium.
- To understand how investors use issuer-specific information to assess green bond credibility.
Main Methods:
- Content analysis of 135 external reviews for second-party opinions (SPOs).
- Empirical analysis using a matched sample of green and conventional bonds.
- Development of a theoretical model linking issuer characteristics to Greenium.
Main Results:
- 82% of SPOs assess issuer greenness, referencing sustainability commitment or environmental achievement.
- Stronger environmental achievement by issuers leads to a higher Greenium.
- Sustainability commitment amplifies the effect of environmental achievement on Greenium.
Conclusions:
- Green bond investors consider issuer's environmental track record and sustainability governance.
- Issuer's environmental achievement is a key driver of Greenium.
- Misalignment between sustainability promises and actions can increase capital costs.
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