The pricing of sustainable asset securitisation bonds

Abstract

The issue of Sustainable Securities (Green, Social and Sustainability) has introduced a new area of study, which is characterised by the issuance of financial instruments that fund projects that promote significant environmental and social benefits. This category of securities includes sustainable asset-backed securities (ABS) and sustainable mortgage-backed securities (MBS). Their growing importance is associated with a market that faces challenges due to a lack of standardisation, regulatory harmonization, and transparency in defining what qualifies as “sustainable”. These issues contribute to limiting the effectiveness of sustainable financial markets by instigating risks such as greenwashing and information asymmetry. This work therefore sets out to investigate the existence of greenium in this type of instrument, which is characterised by a lower return on sustainable securities when compared to conventional securities. Extant literature is extensive, namely in the study of this phenomena for conventional green bonds. However, the literature analysing this effect for ABS and MBS sustainable bonds is non-existent. To fill this gap in the literature, this work conducts a comparative analysis of the credit spreads of sustainable ABS and MBS to their conventional equivalents and, consequently, to check whether variables related to credit risk are determining factors in the spreads of these securities, and if the COVID-19 pandemic affected both pricing and greenium. By extracting ABS and MBS from DCM Analytics, results show that only green and social-labelled securities consistently have significantly lower spreads. However, this effect disappears in a matched sample, emphasizing that potential securities characteristics affect more greenium. On the other hand, sustainability labels show no statistically significant differences in prices. In addition, credit ratings continue to influence spreads across segments, while the impact of rating discordance is limited to conventional securities. Finally, during the COVID-19 period, the greenium effect associated with green securities weakens in the full sample and dissolves in the matched sample, indicating that investor preference for green assets may not persist under higher uncertainty.

Date of Award	31 Oct 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	João Pinto (Supervisor)