Greenium
Formula
Greenium
Greenium (basis points) = (Yield on comparable conventional bond minus Yield on green bond) × 100
Variables
| Yield on green bond | Yield to maturity of the green bond, in %, at issue (cut-off or issue yield) or on a chosen trading date |
| Yield on comparable conventional bond | Yield, in %, of a conventional bond from the same issuer with the same seniority and currency and the same maturity, read from the issuer's yield curve if no exact match exists |
| × 100 | Converts a difference in percentage points to basis points |
Finding the inputs
For sovereign green bonds, cut-off yields are in RBI's auction result press releases, and conventional government bond yields at each maturity are published by FBIL (Financial Benchmarks India). For corporate bonds, use exchange trade data, CCIL or rating agency valuations, and the issuer's other listed bonds.
Reading the number
A positive figure means the green bond yields less, so the issuer pays less interest because of the label. Most measured greeniums are a few basis points. A figure close to zero, or negative, often reflects poor liquidity in the green bond rather than investor dislike of green assets. Always match maturity: comparing a 30-year green bond with a 10-year conventional bond mixes up the greenium with the term premium.
Illustrative example
Glossary terms
From the research
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