Webinar #3 "The Greenium: Evidence from the Bond and Equity Markets"

June 4, 2024

ESSEC - Amundi Chair on Asset & Risk Management


"The Greenium: Evidence from the Bond and 

Equity Markets"

June 4, 2024


16.30 - 17.15: "Do Carbon Emissions Affect the Cost of Capital? Primary Versus Secondary Bond Markets"

by Sébastien Pouget, University of Toulouse Capitole

17.15 - 18.00: "Understanding the Global Equity Greenium

by William W. Xiong, Cornell University

Over the past decade, sustainable investing has experienced remarkable growth, leading to a clear division between "green" and "brown" assets. Theoretically, one might anticipate that green assets would generate lower returns on equity compared to brown assets, as investors trading off financial gain for environmental virtues and as a hedge against climate-related risks. Yet, empirical studies of the equity market have reported inconclusive evidence on this issue. In addition, little attention has been devoted to the impact of sustainable investing on the cost of borrowing on bond markets.

In a first paper presented by Sébastien Pouget (University of Toulouse Capitole), the authors examine the existence and magnitude of a carbon premium for US corporate bonds, both on the primary and secondary markets. The carbon premium is measured by the sensitivity of corporate bond spreads to carbon intensity of the issuing firms. They estimate that the carbon premium exists on both the primary and secondary bond markets, the latter being significantly larger than the former.

The second paper presented by William W. Xiong (Cornell University) reports new evidence of the equity greenium based on a large sample of firms in 96 countries. Focusing on the environmental pillar, they provide evidence that green stocks earned higher returns than brown firms around the world. In addition, they examine whether ESG risk is priced globally or locally in international stock markets. 


Pouget & Kim Bond Greenium 2023.pdf
Karolyi, Wu & Xiong Equity Greenium 2023.pdf