7/
🧩 In sum:
Sovereign green bonds = big promise, small payoff.
The sovereign greenium exists — but remains a tiny price effect attached to a big idea.

ideas.repec.org/p/gii/giihei...

#GreenFinance #SustainableFinance #SovereignDebt #ClimatePolicy #EconTwitter

6/
There’s also a credibility problem:

🔍 None of the >300 sovereign green bond prospectuses we reviewed make environmental promises legally binding.

No clauses, no enforcement, no default events if targets are missed.

5/
So what drives the (tiny) greenium?
We find it increases when:
🌡️ climate transition risks are salient
🌍 countries are more vulnerable to climate change

4/

The median discount on Germany’s green bonds saves about $16 million per year — out of an $80 billion portfolio.

Even converting the entire German debt stock to “green” would cut interest costs by <2%.

3/
💡 Result: The greenium exists, but it is small.
➡️ ~2 basis points in advanced economies
➡️ ~13 basis points in emerging markets

Statistically significant, but economically tiny.

2/
In a new paper, we study 332 matched pairs of green and conventional sovereign and quasi sovereign bonds issued between 2014–2023.
We quantify the greenium: the yield discount investors accept for going green.
The paper is here: ideas.repec.org/p/gii/giihei...

Assume a restructuring in which external public debt needs to go down by 25% and 70% of debt has some sort of priority. You get that the haircut on bonds is 82%
4/4

Add the recent $20 billion swap by the Treasury this goes to 66%. Then the is the request to US banks to put other 20 billion, which they are unlikely to do without some sort of guarantee and you get to 70% of public external debt which will have some type of priority.
3/4

According to the IMF table above, as of June 2025, 60% of Argentina’s external public debt was owed to lenders with preferred creditor status.
imf.org/en/Publicati...
2/4

I am “et al”