An Empirical Analysis of the Determinants of Japanese ESG Bond Yields

Abstract

This study analyzes ESG bonds listed on the Japan Exchange Group's ESG Bond Information Platform to examine how factors such as credit rating, maturity, issuance amount, issuer type, and bond type affect interest rates. Regression analysis reveals that higher credit ratings can lower interest rates, while longer maturities tend to increase them. Larger issuance amounts correspond to lower interest rates. Bonds issued by municipalities, financial institutions, and the construction sector generally have lower interest rates, whereas those from the electricity and gas sector show higher rates. Additionally, green and sustainability bonds were observed to have lower yields compared to other ESG bonds.