THE GREEN BOND AND SUSTAINABLE FINANCE MARKET. THE GREEN BOND PREMIUM: EVIDENCE FROM THE EUROPEAN CORPORATE BOND MARKET AND CHINESE MARKET

This study examines the determinants of greenium – the yield differential between green and conventional bonds-focusing on the European and Chinese green bond markets. It investigates the impact of macroeconomic factors, issuer characteristics such as ESG ratings and certifications, and investor behaviour on greenium dynamics. The research employs comparative analysis and regression models to analyse data from 2010 to 2024 and reveal important differences between the two regions. The findings show that Europe has robust regulatory frameworks such as the EU Taxonomy that have been proving to attract higher greenium and consistently foster confidence among investors. Unlike China, greenium is diluted by the ineffectiveness of state driven mechanisms and inconsistent Environmental, Social, and Governance (ESG) frameworks in China. The findings are consistent with Signalling Theory, which indicates that ESG ratings play a role in lowering information asymmetry in mature markets such as Europe, but they do not in China because of poor certification practises. Broad implications call not only for global standardisation of ESG criteria and certifications but also regional collaboration to harmonise green bond standards. As a cornerstone of sustainable finance, the green bond market must advance, and aligning policies, enhancing transparency and encouraging cross border investment is needed, the study concludes. Greenium is a topic for future research to understand behavioural influences and the long term environmental consequences.