Determinants of the S&P Green Bond Index: An Empirical Analysis of the Impact of the S&P Municipal Bond Index and the U.S. 10-Year Treasury Yield

Abstract: Green bonds represent one of the most important instruments of sustainable finance and play an increasingly significant role in mobilizing capital for environmental and climate-related projects. The aim of this study is to examine the impact of the S&P Municipal Bond Index and the U.S. 10-Year Treasury Yield on the performance of the S&P Green Bond Index over the period 2016–2025. The analysis is based on data for the S&P Green Bond Index, the S&P Municipal Bond Index, and the U.S. 10-Year Treasury Yield. The methodological framework includes descriptive statistics, correlation analysis, ordinary least squares (OLS) regression, the Augmented Dickey–Fuller (ADF) unit root test, and the Engle–Granger cointegration test. The empirical results indicate a statistically significant positive relationship between the S&P Green Bond Index and the S&P Municipal Bond Index, while the U.S. 10-Year Treasury Yield has a statistically significant negative effect on green bond performance. The Engle–Granger test confirms the existence of a long-run equilibrium relationship (cointegration) among the analysed variables. The findings highlight the importance of traditional bond markets and interest rate movements in explaining the performance of the green bond market.