Are Green Bonds Valuable to Institutional Investors?

As institutional investors in Korea face increasing pressure to improve the ESG profile of their investment portfolios, green bonds are likely to become an integral part of their bond portfolios in the future. Using the most comprehensive and up-to-date dataset of green bonds issued around the world, we examine the issuance and secondary market pricing characteristics of both the international and the Korean markets for green bonds. We document the existence of a sizeable discount among Korean green bonds even after controlling for issuer and bond characteristics, suggesting that green bond investment in Korea needs not imply a sacrifice in terms of expected returns. During the COVID-19 outbreak, however, these bonds encounter deeper price discounts relative to their peers, emphasizing the need to carefully monitor these assets during periods of market crises.