Geopolitical turmoil and investor green preference: Evidence from the corporate bond market

•Findings show the presence of a small negative risk premium for green securities within the corporate bond market.•The analysis highlights the cost advantages of green bonds with stronger market reactions.•The examination of daily yield spreads indicates a notable shift in investor focus towards green debt.•The study reveals an exacerbation of green preferences in response to geopolitical risk. In this study, we analyze a sample of 1,630 corporate green bonds issued internationally between November 2012 and January 2024 to investigate the yield differences between green and non-green bonds. Our findings reveal a small greenium, particularly significant in the secondary market among carbon-intensive industries, first-time green bond issuers, and riskier issuances. We show that Geopolitical Risk (GPR) significantly influences the greenium in the secondary market, primarily driven by geopolitical acts rather than threats. Additionally, we establish that third-party certifications and corporate exposure to environmental risk are critical in explaining the GPR-greenium relationship. These results underscore the importance of GPR in enhancing investor preference for green bonds, offering important implications for both practice and policy.