This paper analyzes the difference in yield to maturity between two types of ESG-fixed income instruments, and aims to answer the research question "Is there a yield difference between sustainable-linked bonds and green bonds issued in Europe?". The sample consists of a total of 1499 bonds, issued between the time period 2019-2023, where the databases Bloomberg and Refinitive Eikon have been used to collect and filter the data. The null hypothesis is that there is no significant difference between the two bond types, the alternative hypothesis states that one of them has a premium towards the other. For the methodology, the sustainability-linked bonds (SLBs) are matched with green bonds, creating pairs based on similar characteristics. This procedure, which corresponds to previous work by Kölbel & Lambillon (2022), alongside an OLS regression, are used to answer the research question. The results show that there is no significant yield difference between the bond types. This conclusion is drawn from using a Wilcoxon test on the paired bond sample. The result from the regression implies that the yield on green bonds is explained by the defined independent variables to a greater extent than the yield on SLBs. There are amble number of prior studies which have found a present premium on the ESG instruments green bonds (Fatica et al., 2019; Baker et al., 2018; MacAskill et al. 2021; Kapraun, 2021; Löffler et al., 2021; and Zerbib, 2018) and SLBs (Kölbel & Lambillon, 2022; Feldhütter et al., 2023). This essay aspires to use previous research findings as reference for comparing bond types against each other rather than their performance against conventional bonds. Additionally, the SLB instrument is still considered relatively novel and hence this essay aims to contribute to existing knowledge with new inputs and findings.
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:su-227912 |
| Date | January 2024 |
| Creators | Karlsson, Hannah, De Jounge, Arendt |
| Publisher | Stockholms universitet, Företagsekonomiska institutionen |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Student thesis, info:eu-repo/semantics/bachelorThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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