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JEL Classification:

Q01, G10, G12


If we examine in aggregate the characteristics of a sample of green bonds matched with their brown bond closest neighbours we meet into a puzzle. Green bonds have higher yields, lower variance and are also more liquid. The institutional-private issuer and the green certification/non certification breakdowns help to explain the puzzle. Green bonds from institutional issuers have, with respect to their brown bond correspondents, higher liquidity, while negative premia before correcting for their lower volatility. Green bonds from private issuers have much less favorable characteristics in terms of liquidity and volatility, while positive premia with respect to their brown correspondents, unless the private issuer commits to certificate the “greenness” of the bond.

An implication of our findings is that the issuer’s reputation or green certifications are essential to reduce informational asymmetries, avoid suspicion of green-(bond)washing and obtain relatively more convenient cost of financing conditions.


green bonds, environmental sustainability, bond yields, liquidity