The European Investment Forum took place over 2 days between 28-29 April 2019. It addressed themes that were intended to challenge the frontiers of investment thinking by showcasing innovative ideas across the natural and social sciences.
At the heart of the Forum was a global research prize recognising high-quality and innovative research being undertaken by early career academic researchers globally. Priority was given to research excellence, novel insights and applicability to asset management. Five finalists were selected to present at the Forum, from those two winners were picked. Two winners were selected; the first for best research paper and the second for best presenter.
For more details about the winners and finalists, you can view the videos below.
Really, what we’re trying to get at is if investors are presented with assets that are otherwise identical but one is used for green projects and the other one is used for non-green projects, if they’re willing to pay more for the one that actually backs green projects. So this is the term the greenium. Really, it tells you something about whether investors are essentially willing to give up returns to invest in environmentally sustainable assets.
We can actually find almost exact matches of green and non green securities that are issued at the exact same time just because of structural differences with the muni bond market. We just compare these two assets, and if we see a premium in which the green asset actually trades at, it tells us something about how whether investors are willing to give up returns to essentially invest in these. These assets are the same for risk and return standpoint. So perhaps unsurprisingly to a lot of people, there is no pricing differential between the two. And actually, what we find is that– at least in the US muni space– is not only is there no pricing differential, but investment banks appear to charge slightly more to issue the green bonds.
Do you want to issue green if it costs more? And I think that’s the important part. And we actually got a bunch of questions about this from news reporters of like, oh, is this a really bad thing? And like what would you tell people actually issuing these bonds? And I think the important part is if you’re going to issue what is effectively the same thing and you’re going to get the same pricing, you just want to be sure you’re not paying more for this.
And I think that’s important sort of policy to take away from all of this. Honestly, I was not expecting to be selected, and now I’ve got good news it’s been a little bit of a confidence boost because you know you write these papers that I couldn’t tell if I was any good or not so I think it’s great that people are sort of interested in this topic.