Different shades of greenium: banks, utilities, and the price of transition

For A-rated banks, we find a greenium of up to 7.5bps at the 10yr point, while BBB-rated utilities show a more modest effect, generally ranging between 4-9bps across most maturities. Much of this difference reflects the composition of each labelled bond universe: Swedish banks and UK utilities are overweight in GSST issuance, while US issuers in both sectors remain concentrated in conventional bonds.

Beyond pricing, GSST bonds offer investors more transparency on capital expenditure and transition plans than conventional bonds raising funds for similar purposes. This can support more informed credit analysis and allow investors to hold higher-emitting issuers within a portfolio while engaging for greater disclosure.

About the authors

Kamesh Korangi

Managing Director, Head of Portfolio Strategy

Kamesh is an experienced credit derivatives and bond trader who leads the development of AFII’s portfolio analytics tool, Co₂liseum. He was previously a market maker and credit analyst at NatWest Markets, and holds a PhD in deep learning.

Prahalad Prasad

Associate Director, Research

Based in London, Praha covers topics including but not limited to the just transition, sustainability-linked bonds and deforestation. He previously spent seven years in Lloyds Bank’s Debt Capital Markets team.