Will Air Pollution Affect the Green Bond Spread of Green Bonds? —— Investors’ Environmental Preference and Green Premium

Prof. ZHAO Huimin

Associate Professor in Finance

Sun Yat-Sen University


Date: 30 October 2020 (Friday)

Time: 15:00-16:30

Venue: E22-1067



Building a green financial system has become a national strategy. Green bonds are one of the most important financing tools for China’s green financial market. Due to the difficulty in distinguishing environmental protection preferences from economic factors, the existence of green premium and whether the green premium is affected by investors’ environmental preferences become challenging problems. We use matching method and control liquidity factors to isolate the true green factor spread, and prove that green premium exists and is significantly negative. Further, we study the relationship between the green premium and investors’ environmental preferences in China using air pollution PM2.5 data as a proxy for investors’ environmental preferences. We find that the more severe the air pollution is or the more drastically the air quality changes, the lower the relative yield of green bonds will be. The conclusion suggests that the secondary market for green bonds is significantly influenced by investors’ environmental preferences. The government should strengthen guidance, raise investors’ environmental awareness, advocate the concept of socially responsible investment, and create a more healthy and transparent market environment.



Prof. Zhao is an associate professor in Finance at Sun Yat-Sen University. She has solid background in financial mathematics and her research interests cover asset pricing, private equity, and behavioral finance. She has been in charge of a project funded by National Natural Science Foundation of China and participated in a Major Project funded by National Social Science Foundation of China, a Key Program funded by National Natural Science Foundation of China, and several General Programs of National Natural Science Foundation of China. She has more than ten publications in prestigious finance journals including Mathematical Finance, Journal of Futures Markets, International Review of Finance, and Chinese journals including 經濟研究, 金融研究, 系統工程理論與實踐, etc.