While responsible investors consider that the environmental and social pillars are highly interconnected when implementing ESG and climate strategies, our research shows that the green and social bond markets are not integrated.
Indeed, we notice that the social bond premium is not positively correlated with the greenium. On the contrary, we found a negative long-term relationship between the two premia. If we consider a dynamic analysis, we observe that the premia are highly time-varying. On average, the greenium is about -3 bps while the social bond premium is not significant and close to zero. These results indicate a behavioral difference between the primary and secondary markets. This is particularly true for social bonds that had a positive premium last year. More generally, the level of these two premia (especially the social bond premium) are a long way from reflecting the major concerns about a just transition to a low-carbon economy, and the financing dimension of net zero policies.
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