The Cost-of-Capital Effects of Green-Banking Policies: A Multi-Asset Empirical Analysis of U.S. Financial Institutions' Equity Valuations, Green Bond Premia ("Greenium"), and Portfolio Decarbonization Velocities

• Abbas Ahsun

  Texas University

  Author

The integration of environmental sustainability into financial sector regulation has accelerated globally, yet the precise cost-of-capital implications for U.S. financial institutions remain inadequately quantified across multiple asset classes. This study investigates the causal relationships between green-banking policy implementation and three distinct financial outcomes: equity valuation effects, green bond pricing anomalies ("greenium"), and portfolio decarbonization velocities. Employing a multi-asset empirical framework spanning 2015–2025, we analyze a comprehensive panel dataset comprising 47 U.S. financial institutions, 284 green bond issuances, and quarterly portfolio carbon intensity disclosures. Our findings reveal three significant results: (1) green-banking policy adoption is associated with a 3.2% average increase in equity valuations for early adopters, with institutional investors exhibiting a 12.7% higher allocation to banks with comprehensive green-banking frameworks (p < 0.01); (2) the greenium across U.S. corporate green bonds averages 4.8 basis points, with notable temporal variation peaking at 9.2 basis points following major climate events, consistent with findings from German sovereign bond markets ; and (3) portfolio decarbonization velocities average 6.3% annually, yet exhibit a statistically significant 2.1% deceleration following policy announcements, suggesting short-term portfolio adjustment frictions. These findings contribute to the growing literature on sustainable finance by providing the first multi-asset empirical evidence linking green-banking policies to measurable cost-of-capital effects in the U.S. context, with practical implications for regulators, institutional investors, and bank treasury functions.

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