| Summary: | Green bonds emerged as an innovative fixed income product with potential to mobilize capital to promote the climate change mitigation or adaptation. The present study aims to investigate whether the green bonds integration into the investor’s portfolio provides superior returns or if it implies a trade-off between sustainability concerns and financial performance, through the analysis of green and conventional bond indices. The analysis of returns suggests low volatility and consequently, low investment risk for both types of indices. The difference between the means of returns were not statistically significant, implying the rejection of the trade-off theory between sustainability and financial performance. Also, short-run dependencies between green, investment grade (AAA, AA, A e BBB ratings) and conventional governmental-related indices were found. Through the study of the long-run dynamics 20 cointegration relationships were identified, out of which only 4 showed a long-run equilibrium relationship and 9 revealed a short-run relationship. Evidence of strong exogeneity was found across 2 relationships. This weak expression of long-run cointegration suggests potential for benefits associated to the investment portfolio diversification to green bonds.
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