The Climate Bonds Initiative has released a new report titled “Green Bond Pricing in the Primary Market” which observes how green bonds perform in the primary markets. This report includes green bonds issued in the first six months of 2022 (H1 2022) and is limited to USD and EUR bonds with a minimum original issue size of USD500m. REGlobal provides a brief extract of the report…

Key highlights:

  • The sample includes 93 green bonds with a combined face value of USD 93.3 billion, priced between January and June 2022 (H1 2022).
  • Green bonds in both EUR and USD performed well on all metrics in the primary market, on average.
  • Green bonds achieved higher book cover and spread compression than vanilla equivalents, on average.
  • Overall, 65 per cent of green bonds were allocated to investors describing themselves as having green or responsible investment mandates.
  • Total assets in green bond ETFs ended H1 at USD 1.75 billion, a decline of 3 per cent on the prior period..
  • After 7 and 28 days, green bonds had tightened by more than comparable vanilla baskets and corresponding indices, on average.
  • Sustainability-linked bonds exhibit evidence of greenium.
  • Green bonds maintain better liquidity in secondary market.
  • Sovereign Green Bond Club: three sovereign issuers added one new bond each while the EU (supranational) priced two green bonds with a greenium.

Market developments

The Russian invasion of Ukraine in February and subsequent European energy crisis exacerbated post COVID-19 inflation, impacting bond market dynamics. Rising rates and high volatility resulted in decreased bond issuance, and the market was thick with anecdotes of issuers pulling deals at the last minute. The USA faced demand-driven inflation post COVID-19, which was expected to react to monetary policy measures, while in Europe the inflation was largely supply-led and harder to address. The ECB has been the largest buyer in the European bond market for several years and is in the process of withdrawing that support, clearing the way for interest rate increases.

In EUR, corporate bond spreads at least doubled in H1. The supply of benchmark green bonds remained steady, but given the economic backdrop, investors had limits about overpaying for anything and there were reports of both vanilla and green bond issuers offering larger new issue premiums to attract investors to new deals.

During H1, green bonds amounting to USD236 billion were added to the Climate Bonds GBDB as Q2 issuance (USD133 billion) picked up slightly compared to Q1 (USD103 billion). May was the busiest month (USD50 million) helped by several large deals from Austria, which priced its first sovereign green bond, a 2049 maturity (EUR4 billon/USD4.2 billion), TenneT (a four tranche deal worth EUR3.85 billion/ USD4.1 billion), and EIB (EUR4 billion/USD4.3 billion). Almost 70 per cent of the H1 green bond volume was denominated in EUR (USD115 billion) and USD (USD47 billion), with 58 per cent of that amount (USD93.3 billion) qualifying for this analysis. Most of the qualifying issuers (65 out of 76) had already issued green bonds, while 11 new issuers came to the market in H1.

EUR green bond pricing

EUR green bonds obtained slightly more subdued order books in H1 2022 (3.1x) compared to the prior half year (3.4x), as did vanilla equivalents (2.4x in H1 2022 against 2.7x in H2 2021). Spread tightening was also lower, with an average of 18.2bps compared to 19.3bps for green bonds, and 16.4bps compared to 17bps for vanilla bonds. Green bonds maintained better performance than vanilla equivalents on both metrics (on average). Individually, 62 per cent of green bonds (38 out of 61) experienced greater oversubscription compared to vanilla equivalents, similar to the 61 per cent in the prior period. 53 per cent of green bonds (32 out of 60) achieved larger spread compression that their vanilla equivalents, the same share as in H2 2021.

Book cover

Two sovereign, supranational, and agency (SSA) issuers were top among the five EUR deals achieving the largest book cover.

KFW 2032 attracted an order book of EUR34 billion, 11.3 times the size of the transaction (EUR3 billion/ USD 3.1 billion), the largest for a green KFW EUR transaction so far. It was also the fifth largest book cover recorded by Climate Bonds for a green bond since 2016 (the record is held by Prologis 2032 with a book cover of 14 times deal size in June 2020) and recorded a negligible new issue premium going on to tighten in the immediate secondary market.

Meanwhile, EIB 2029, priced in January, was the first Climate Awareness Bond (CAB) of 2022. The EUR1bn (USD1.1bn) deal was covered 8.25 times and priced inside both the EIB green and vanilla curves. UK Real Estate Investment Trust (REIT) Segro covered its EUR500m (USD550m) 2030 deal eight times with a book that reached EUR4bn. Investors were attracted by the A credit rating, combined with logistics real estate exposure and the green label. German real estate company Vonovia priced its second EUR green bond, a 2032 maturity, in March. The EUR850m (USD930m) deal was almost six times covered.

USD green bond pricing

The USD market experienced opposite trends. The H1 2022 USD green bond sample achieved an average book cover of 3.8 times, higher than the three times recorded for H2 2021; the vanilla equivalents saw an average book cover of 2.7 times in H1, identical to the previous period. Likewise, the average spread compressions of 29.5bps for green bonds and 22.5bps for vanilla baskets were larger than the 25.9bps and 21.7bps seen in the prior half year. Nine out of 15 green bonds (60 per cent) achieved larger book cover than vanilla counterparts. 14 out of 20 green bonds (70 per cent) experienced larger spread compression compared to equivalents.

Book cover

Korea’s largest electric power supplier and distributor, Korean Electric Power Co (KEPCO 2025), achieved the highest book cover recorded for a USD green bond since 2016, at 8.2 times. The prior record of eight times was reached by both Mitsubishi UFJ 2023 in 2020 and Verizon 2029 in 2019. Repeat green bond issuer KEPCO priced its USD500m green bond in June (together with a USD300m 2027 bond), and the combination of the shorter tenor, AA credit rating, state ownership, USD denomination, and green label created massive investor interest. The proceeds from the deal were earmarked to finance or refinance the development and operations of projects consistent with KEPCO’s sustainable finance framework, which highlights solar and wind, increasing stability in the power supply, clean transportation, and energy efficiency as eligible green project categories.

Korea East-West Power (Korea East-West Power 2025) published an updated sustainable finance framework in April 2022, outlining its roadmap to transition to renewable energy, and naming renewable energy and energy efficiency as eligible green project categories. Its first USD green bond was priced in May, a USD500m three-year bond which attracted book cover of six times. Again, the stronger credit rating, state support, short tenor, choice of currency, and transition strategy will all have helped to attract investors. New Jersey-based Public Service Electric and Gas co (PSEG 2032) priced its debut green bond in March, receiving an order book six times greater than the USD500m deal size. The proceeds of the deal were earmarked to support the company’s transition to cleaner energy. REIT Welltower Inc (Welltower 2032) invests in healthcare infrastructure and priced its second green bond in March to support its commitment to green buildings, energy efficiency, and water efficiency. The USD550m bond covered its book 5.3 times.

The greenium: 10 out of 50 green bonds priced on their yield curves

The new issue premium is the extra yield that a buyer receives, and a seller pays for a new bond, compared to where seasoned bonds from the same issuer are trading in the secondary market at the time of issuance. A new issue premium is a standard feature of the bond market. Sometimes, a bond may be issued with a higher price, and thus have a lower yield compared to outstanding debt. The bond will price inside its own yield curve. This is known as a new issue concession; when present in a green bond, we have termed it greenium. This is an excellent outcome for any issuer because it means that it pays less to fund its green bond compared to its vanilla debt. There is no reason why a bond being green should impact its price, since green bonds rank pari-passu (on equal footing) with bonds of the same payment rank and issuer. There is no credit enhancement to explain pricing differences and issuers of green bonds often incur costs such as Second Party Opinions and Certification, although these are typically negligible. Green bonds and vanilla equivalents are subject to the same market dynamics such as supply, rate expectations and geopolitical crises.


In H1 2022, macroeconomic and geopolitical issues overwhelmed financial markets but must not distract from the ongoing and longer-term climate crisis. Bonds of all types have suffered during the period, and this is the first time that the green bond market has experienced the impacts of rising interest rates. The green bond market is a well-developed source of capital and Climate Bonds expects it to support the prioritising of sustainable development, facilitating debt financing for climate mitigation and adaptation and resilience assets, projects, and expenditures.

Bonds and interest rate rises are not friends, but during H1 the supply of green bonds declined just 1 per cent on the prior period and USD 236 billion of green bonds were added to the Climate Bonds GBDB. Green bonds were issued in 30 currencies, with 68 per cent coming from deals issued in USD (USD 47.4 billion) and EUR (USD 114.6 billion).

Sovereign green bonds deliver a very clear signal of commitment to climate ambitions and bring myriad benefits including local market developments. Austria became the 13th member of the EU27 to join the Sovereign Green Bond Club. The Netherlands, Germany, and France, all reopened existing positions in green bonds, extending their access to cheaper financing.The remaining 14 members of the EU must start actively preferencing green expenditures and fund them through thematic debt to send a signal to the market and attract investment from the private sector.

The full report can be read here