Do Green Bonds Trade Differently?

Green bonds have become key instruments in climate finance, yet their secondary market trading behaviour remains largely unexplored. Using intraday RFQ data from Europe’s largest corporate bond trading platform from 2017–2022, the paper presented in this Decarbonization Seminar/Joint Seminar ZEW and MISES documents that green bonds trade faster, in larger sizes, and at tighter spreads than conventional bonds of the same issuer, but their buy‑side RFQs experience higher trading frictions, consistent with strong, relatively inelastic demand meeting limited free float. During the COVID‑19 dislocation, green bonds experience smaller increases in price volatility and spreads. Conventional bonds of green issuers also exhibit improved trading conditions, consistent with firm-level information spillovers from green issuance. Green bonds react more sharply to severe environmental controversies but show no differential response to credit rating changes, consistent with a clientele that values environmental integrity alongside standard credit fundamentals.