Since their introduction in 2007, cumulative issuance of green bonds has grown to $3 trillion. Growth in the green bond market has outpaced the global bond universe, though green bonds still account for only 3% of the total. A persistent concern is that green bonds are harder to trade than ordinary bonds – a worry with real consequences, since poor liquidity raises borrowing costs and deters investors, ultimately weakening green finance as a policy tool. Concern about green bonds rests on three beliefs: that sustainability-mandated investors buy and hold green bonds rather than trading them; that green bonds carry extra information costs because of greenwashing risks and evolving taxonomies; and that the variability of financed green projects fragments the market. All three suggest green bonds should be less liquid than bonds overall. But is the worry justified?  […]