During the last few years, sustainable investing instruments have gained much attention, and the demand for them has increased significantly. Fixed-income investors also participate by investing in green bonds. Various studies have found a difference in pricing between green and conventional bonds, the so-called green premium or ‘greenium’. This research specifically looked at the green bond market and sought to find out whether rising demand is leading to a green premium in Switzer-land.

A cross-sectional panel analysis, including 26 green bonds and 26 traditional bonds with similar characteristics from the same issuers, was used to find any deviations in pricing. The bonds were all domestic CHF (Swiss francs) bonds listed on the SIX Swiss Exchange. The observed period lasted from June 2022 until April 2023, during a period of rising interest rates across the globe. Using data from Bloomberg, a model portfolio in RStudio was set up to investigate the topic. Various hypotheses were put forward to test different samples for green premiums in different time periods.

In the observed period, we discovered a positive greenium of approximately 15 basis points (bps) on the green bonds. Thus, green bonds tend to have a higher yield to maturity (YTM) than conventional bonds. Furthermore, we found deviations in different time periods, looking at sub-periods, but not with statistical significance. Only in the energy sector could clear and statistically significant deviations with time be seen. When checking for greeniums in different sectors, we found a significant positive green premium in non-governmental and non-financial institutions. The biggest difference was seen in the energy sector, which had a positive greenium of 262 bps. As the market is still maturing, the sample consisted only of a small eligible selection of bonds. Additional research should be conducted to include a longer period of positive interest rates and a larger bond sample when avail-able. Nevertheless, this study contributes to the existing literature on green bond premiums. By newly covering the Swiss market, it delivers insightful information for bond investors in Switzerland and around the globe. Moreover, it adds an additional perspective to traditional bond pricing models.