From risks to opportunities: The impact of green public investment programs on sovereign yields
Publication date
2025-05
Authors
Alessi, Lucia
Duranovic, Anja
Kvedaras, Virmantas
Monasterolo, Irene
Editors
Advisors
Supervisors
Document Type
Article
Metadata
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cc_by
Abstract
We study whether markets are accounting for the positive impact of countries’ climate investments into their judgement about country risk, proxied by sovereign bonds’ yields. Using the introduction of the European Commission (EC) Recovery and Resilience Facility (RRF), launched in 2021, as a natural experiment, we use a staggered difference-in-difference model to analyse the market pricing of the greenness of EU member states’ Recovery and Resilience Plans (RRPs). We find that the aggregate impact of climate investments in EU countries’ recovery plans on sovereign bonds is yield-reducing, and increases with longer residual maturity of bonds.
Keywords
Bond yields, Country climate investments, European Recovery and Resilience Facility, Sovereign climate risk, Staggered difference-in-difference, Business, Management and Accounting (miscellaneous), Finance, SDG 13 - Climate Action, SDG 15 - Life on Land
Citation
Alessi, L, Duranovic, A, Kvedaras, V & Monasterolo, I 2025, 'From risks to opportunities : The impact of green public investment programs on sovereign yields', Research in International Business and Finance, vol. 77, no. Part A, 102866. https://doi.org/10.1016/j.ribaf.2025.102866