Green Bonds Are Becoming Less Appealing for U.S. Issuers

The Altamont Pass wind farm past mustard flowers outside Tracy, California, on April 6, 2023. Credit: David Paul Morris/Bloomberg.

Issuance of bonds meant to benefit the environment will likely remain muted in the United States because companies are no longer getting a material price advantage for selling such debt, according to T. Rowe Price Group Inc.’s Matt Lawton. The so-called ‘greenium,’ which measures the spread of green bonds to non-green bonds from the same issuer, is now ranging between 0 to 1 basis point (bps) on average for corporations, which isn’t “economically appealing for an issuer,” he said. Sovereigns are getting about 7 bps on average, he added.

“I’ve spoken with treasurers where they’re absolutely looking at the greenium,” he said. “For some treasurers, in my experience, if they don’t see a material economic incentive on the other side, that’s a headwind.”