Green bonds, which earmark proceeds for environmentally positive projects, have gained significant traction in recent years. However, despite their functional similarity to conventional bonds, empirical evidence suggests that green bonds often trade at a premium, termed the “greenium,” a portmanteau of “green” and “premium,” in comparison to conventional bonds. This discrepancy has spawned interesting philosophical, economic, and legal questions among academics, policymakers, and practitioners alike surrounding, for example, the paradox of this phenomenon in traditional asset pricing theory and the abstractions of the fiduciary responsibility of investment managers tasked with a sustainable investment mandate. This chapter offers a review of the state of the art, providing context for the evolution of sustainable investing up to the introduction of the impact finance ecosystem and detailing its role in internalizing externalities and adjusting risk perceptions, as well as supporting the flow of private capital toward sustainable development priorities. The research explores the ecosystem’s multi-pronged transmission mechanism and evaluates the prevailing market regime, particularly with respect to issues of adverse selection and greenwashing. I delve into the characteristics and dynamics of green bonds, provide a review of the expansive corpus on the so-called “greenium,” and highlight the implications of investor behavior and market efficiency on the dynamics of green bonds relative to their hypothetical non-green comparators. I examine the concept of the greenium in greater detail, particularly with regard to its relevance to issuer cost of capital and investment portfolio construction. Beyond the greenium, I also explore other limiting factors influencing the cost of capital for issuers.