ESG-Labeled Bonds: Are Greeniums Doomed To Dwindle?

Historical and current analyses do not guarantee future results.

Greeniums as at July 7, 2023. Annual issuance: vintage years through December 31, 2022

Source: Bloomberg and AllianceBernstein (AB)

Investors in ESG-labeled bonds expect well-structured issues with strong green or social credentials to command higher prices than the same issuer’s conventional bonds. This price premium, known as the “greenium,” seems to have been shrinking over time (Display). But factor in metrics such as quality and volume of issuance per vintage year, and a more nuanced picture emerges.

Although it’s common knowledge that the average greenium across major bond indices has decreased in recent years, the significance of issuance year (vintage) for greeniums is less well understood. But vintage year is important, because both the issuance levels of ESG-labeled bonds and the quality of their ESG proposition have varied significantly over time.

ESG, SDG, CER, GRI, FSC, LCA, WELL] Read More