Practical Applications of Doing Well While Doing Good: The Elusive Quest for Green Bond Returns

Abstract

In Doing Well While Doing Good: The Elusive Quest for Green Bond Returns, from the Spring 2023 issue of The Journal of Impact and ESG Investing, Juliusz Jablecki, of Narodowy Bank Polski and the University of Warsaw, finds that while the green bond label tends to be associated with slightly lower bond spreads, it does not significantly affect overall performance. Credit rating, duration, and industry sector membership have a much stronger influence. Additionally, green bonds do not outperform nongreen bonds during market sell-offs—in fact, they had worse drawdowns in the sell-off of March 2020. However, while green bonds by themselves do not offer a return premium, investors can use them in a data-driven active portfolio management strategy to deliver above-market returns.