Investors (small spheres) leave the central capital pool and flow toward one of six bond tracks: four verified green-project types on the left — solar, wind, water infrastructure and waste-to-energy — and two conventional tracks on the right — general corporate debt and plain infrastructure debt. Each arrival "invests" for a dwell period, growing that project's structure and adding to its running capital total. Teal spheres are ESG-mandated investors who favour green bonds almost regardless of price; amber spheres are yield-driven investors who compare the coupon on offer.
greenYield = baseYield − greenium
P(green | yield-driven) = clamp(0.55 − 3·(convYield−greenYield) + 0.1·verification)
P(green | ESG-mandated) = clamp(0.80 + 0.15·verification)
- Greenium (bps) — the yield discount a green bond carries versus an equivalent conventional bond. A wider greenium means the issuer borrows more cheaply, but it also makes the bond less attractive to purely yield-driven investors, who route more capital toward the conventional track.
- ESG mandate share — the fraction of investors whose mandate requires environmental impact regardless of yield; raising it keeps green capital flowing even when the greenium widens.
- Verification strictness — how rigorously a third party confirms proceeds actually funded eligible green projects. Stricter verification raises investor confidence (and the glow on each project's platform ring), pulling in slightly more capital from both investor types.
- Investors — the size of the capital pool circulating through the market; more investors makes each track's growth easier to compare.
Real-world relevance: green bonds fund specific eligible projects — renewable energy, clean water, low-carbon transport, waste management — and are ring-fenced and reported on so investors can verify their money went where promised. The "greenium" is the small yield sacrifice many investors accept for that verified environmental impact; how much capital keeps flowing to green projects depends on how many investors have an ESG mandate and how much they trust the verification behind it.