Anecdotal evidence suggests that the negative yield (positive price) difference between green and conventional bonds, the so-called greenium, has disappeared. In this paper, we first analyze whether this is the case. We are able to match a large sample of global, corporate green bonds to similar conventional bonds by the same issuer. Following Zerbib (2019), we extract the green bond premium as the fixed effect of regressions of differences in liquidity and volatility on yield difference for every year from 2020 to 2024. We are the first to show that the greenium not only has disappeared but that it has reversed suggesting declining green preferences of investors. In the second part of the paper, we explore whether broader sentiments on the market such as the ESG backlash (Baker et al., 2024) or doubts about the effectiveness of ESG investing (Hartzmark and Shue, 2022) can help explain why investors are no longer willing to pay more for green bonds. We only find evidence of ESG backlash. Using ESG scores in interaction with a post 2022 dummy and bond as well as macro-level controls, we show that high ESG scores lose importance after 2022 in our sample consistent with increasingly negative sentiment towards ESG investing. Meanwhile, investors in the market for green bonds seem not the exhibit the “counterproductive” behavior found in Hartzmark and Shue (2022): the greenium is lower for dirtier firms in term of emission intensity before 2023. Nevertheless, after 2022 we observe a reversal of green bond premia across clean and dirtier issuers. This implies that despite the efforts in regulation such as the European bond standard to limit greenwashing, it may be difficult to convince investors to pay for green, making financing decarbonization more difficult.
