The Impact of ESG Performance on the Green Premium: Evidence from the Chinese Bond Market

DOI: https://doi.org/10.62517/jbm.202509108

Author(s)

Yun Fan1, Yajie Wang2,*

Affiliation(s)

1School of Finance, Nankai University, Tianjin, China 2School of Management, Harbin Institute of Technology, Harbin, Heilongjiang, China *Corresponding author.

Abstract

This paper selects 139 pairs of green bonds and matched non-green bonds from 2016 to 2023 as samples and employs a two-way fixed-effects model and a multi-time-point DID model to analyze the impact of Environmental, Social and Governance (ESG) performance on green premium and bond spreads. The study finds that the spread of green bonds is about 15 basis points lower than that of non-green bonds. The higher the ESG rating, the lower the bond spread and the green premium, indicating that a high ESG rating brings significant financing advantages to issuers. When the ESG rating improves positively, the bond spread decreases significantly, but the effect on the green premium is not obvious. When the ESG rating declines negatively, neither shows a significant response. This study verifies the existence of the green premium in China's bond market and confirms that ESG ratings have a signaling function, providing references for understanding investors' green preferences and formulating green financial policies.

Keywords

Green Premium; Bond Spread; ESG; Multi-Time-Point DID Model

References

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