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Is Green Financing still a Cheaper Way to Raise Money?



As of 18 March 2024, sustainable bond issuance year-to-date is USD253 billion, marking a 12% increase year-on-year and accounting for 11% of the overall bond market in Q1 2024. Europe continues to be the leading region in the sustainable bond market representing 58% of the total issuance, followed by supranational issuers at 22%, Asia at 9% and North America at 8%.





Initiatives to support and standardise green bond issuance are prevalent, encouraging investment in environmentally friendly projects and activities. For example, The Hong Kong Monetary Authority (HKMA)’s latest Guideline on the Green and Sustainable Finance Grant Scheme has extended the Green and Sustainable Finance Grant Scheme (GSF Grant Scheme) that provides subsidies for the costs of eligible green and sustainable bonds and loan issuances in Hong Kong to 2027.


The HKMA GSF Grant Scheme consists of two tracks, covering:

  • General Bond Issuance Costs: covering bond issuance expenses (e.g., arrangement, legal, audit, listing fees, etc.) for eligible first-time green, social, sustainability, sustainability-linked and transition bond issuers; and

  • External Review Costs: covering transaction-related external review fees (e.g., including pre-issuance and post-issuance external review) for eligible green, social, sustainability, sustainability-linked and transition bond issuers and loan borrowers, including first-time and repeated issuers and borrowers.

Other policy incentives have been transferred through banking activities as well, for instance, HSBC has set interest rebate policies for eligible sustainable projects in Greater Bay Areas in China to support green project development.

Research findings from various sources highlight the dynamics and market perceptions of green bonds. The term "greenium" or green-premium refers to the yield spread observed in green bonds, which they typically have a lower yield compared to conventional bonds. This lower yield means that green bonds are often more expensive for issuers but offer lower returns to investors. The greenium represents the premium investors are willing to pay for green bonds due to their environmental benefits and alignment with sustainable investment goals.


According to research by the Board of Governors of the Federal Reserve System (2022), the greenium emerged in 2019, driven by the growth of sustainable asset management influenced by EU regulations. This greenium is influenced by factors such as bond oversubscription and inclusion in sustainability indices, and is more significant for large, investment-grade issuers, particularly in the banking sector and developed economies. The study also notes that while green bond governance impacts the greenium, the credibility of the underlying projects does not. [1]


JPMorgan Chase & Co.’s research (2024) argues that green, social and sustainable (GSS) bonds have often traded at a premium to like-maturity conventional bonds, thereby providing their issuers with a cheaper source of funding for implementing GSS projects. They found that the biggest secondary market greenium was observed in 2022, ranging from 4 to 8 basis points and averaging 6 basis points over the year. By contrast, the average greenium during the last six months of 2023 was only 2.5 basis points.[2]


In China, Q. Li, K. Zhang, and L. Wang's study (2022) indicates that while current policies lower financing costs for green bonds and rely on government guarantees, green features alone do not reduce issuance costs. The study also highlights issues like resource concentration on large state-owned enterprises and potential greenwashing risks, suggesting that excessive government support may impede market competitiveness. [3]


These research findings on greenium suggest significant business implications. Issuers benefit from lower capital costs due to strong investor demand for sustainable investments, influenced by favourable regulatory frameworks like those in the EU and HK, China. The greenium's variability over time highlights the importance of timing bond issuances to market conditions. Strong governance practices are crucial for attracting investors, while excessive government support in regions like China may hinder market competitiveness. Companies should strategically align their sustainability commitments with genuine practices to capitalise on cheaper funding opportunities and enhance market trust.


The best timing for issuing green bonds is when market demand for sustainable investments is high, supported by favourable regulatory changes, and a significant greenium (yield spread) exists. Issuance should coincide with stable economic conditions and major corporate sustainability initiatives to enhance credibility and attract investors. Additionally, favourable periods are when green bonds experience oversubscription and inclusion in sustainability indices, indicating strong investor interest and better pricing opportunities. Follow GC Insights ESG regulatory and market research for more sustainability trends and insights.



It is difficult to be precise about the time required to prepare and issue a Green Bond as much will depend on the issuer’s internal organisation and the complexity of the Green Bond Framework and subsequent offering. However, IFC suggests that excluding scoping work, preparation and execution might take 8 - 12 weeks.



GC Insights can streamline your green bond issuance process by providing research-guided strategies tailored to your business needs. Leveraging the latest market insights, GC Insights helps you design a robust green bond framework that aligns with industry standards and sustainability goals. Our expertise ensures your green bonds not only meet regulatory requirements but also attract environmentally-conscious investors, enhancing your company's reputation and commitment to sustainable practices.


[1] Caramichael, John and Andreas Rapp (2022). “The Green Corporate Bond Issuance Pre- mium,” International Finance Discussion Papers 1346. Washington: Board of Governors of the Federal Reserve System,


[3] Quan Li, Kai Zhang, Li Wang, Where's the green bond premium? Evidence from China, Finance Research Letters, Volume 48, 2022, 102950, ISSN 1544-6123,


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