Does The ECBs Decarbonisation Policy on Corporate Bond Holdings Allow a Lower Cost of Green Financing?

Abstract

This paper examines whether the ECB announcement on 19 September 2022, which outlines the details of the central bank’s plan to gradually decarbonise its corporate bond holdings, resulted in a decrease in the cost of financing for eligible green bonds. To conduct this analysis, we followed the framework provided by Eliet-Doillet and Maino (2022) and used panel data from 3 January 2022 until 2 April 2024, based on the bonds of the ECB’s Corporate Sector Purchase Programme portfolio. We adjusted the model with the inclusion of macroeconomic variables, such as inflation and interest rates, to account for the inherent volatility that arose during the studied period; we employed a Difference-in-Differences analysis. Our findings indicate that this announcement did not have a statistically significant impact on eligible green bonds. Instead, as expected, inflation and interest rates had highly statistically significant impacts on the cost of financing for green and conventional bonds.