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Abstract(s)
This paper offers a comparative analysis of the credit spreads and pricing of sustainable and conventional corporate bonds. Using a cross-section of 30,368 bonds issued by 8,267 nonfinancial firms globally between 2012 and 2022, we find that sustainable and conventional bonds react differently to common pricing factors. Notably, investors rely less on credit ratings when pricing sustainable bonds compared to conventional bonds. We also find no significant difference in the spreads of sustainable bond tranches relative to similar conventional bonds. This result holds across green, social, and sustainability bonds, as well as in a matched sample of conventional bonds. Furthermore, our findings are consistent across both pre-COVID and COVID periods, indicating that issuing firms do not use sustainable bonds as a strategy to lower borrowing costs.
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Keywords
Bond pricing ESG Sustainable bonds Green bonds Social bonds Sustainability bonds COVID-19