FFA Working Papers 4:007 (2022)1127

Attractiveness of Chinese Bonds Financing Climate and Environmental Projects.

Karel Janda, Binyi Zhang
Prague University of Economics and Business,
Institute of Economic Studies, Charles University


As facilitated by governmental authorities promising sustainable economic growth, green bonds have gained prominence in China’s capital market to scale up the transition to a climate-resilient economy. Although the issuance volume of the Chinese green bond market has been growing rapidly in recent years, the impact of green label on bond pricing is not adequately studied. Thus, this paper aims to investigate whether this newly developed financial instrument offers investors in China an attractive yield compared to other equivalent conventional bonds. By applying a matching method and subsequently a fixed-effects estimation, our empirical results reveal a significant negative yield premium of green bonds on average -1.8 bps lower than their conventional counterparts in the Chinese secondary market. In addition to that, the yield premium is found to vary across issuers’ business sectors mainly due to the public reputation of bond issuers. Moreover, our empirical results reveal an insignificant relationship between the green certification and the yield premium, reflecting an inconsistent green definition in the Chinese market. Our results point to some practical implications for policymakers and investors.

Keywords: Green bonds; Green bond premium; ESG; China
JEL classification: G12, Q56

Received: November 25, 2021; Revised: April 26, 2022; Accepted: June 14, 2022; Published online: February 21, 2022  Show citation

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Janda, K., & Zhang, B. (2022). Attractiveness of Chinese Bonds Financing Climate and Environmental Projects. FFA Working Papers, 4, Article 2022.007. https://doi.org/10.XXXX/xxx.2022.007
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