  Motivated by the recent studies on the green bond market, we build a model in
which an investor trades on a portfolio of green and conventional bonds, both
issued by the same governmental entity. The government provides incentives to
the bondholder in order to increase the amount invested in green bonds. These
incentives are, optimally, indexed on the prices of the bonds, their quadratic
variation and covariation. We show numerically on a set of French governmental
bonds that our methodology outperforms the current tax-incentives systems in
terms of green investments. Moreover, it is robust to model specification for
bond prices and can be applied to a large portfolio of bonds using classical
optimisation methods.
