Environmental, Social and Governance (ESG) Performance and Sovereign Bond Spreads: An Empirical Analysis of OECD Countries

Capelle-Blancard, Gunther; Crifo, Patricia; Diaye, MarccArthur; Scholtens, Bert; Oueghlissi, Rim

doi:10.2139/ssrn.2874262

Cited by 20 publications

(34 citation statements)

References 49 publications

(25 reference statements)

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“…We also computed alpha values from a multi-factor model, including some fiscal and economic variables as controls. Previous related literature [7,8] controlled for gross domestic product (GDP) growth rate, inflation, fiscal condition (debt/GDP and Primary Balance (PB)/GDP), current account, liquidity ratio, country openness and sovereign credit ratings. For a more extensive discussion and understanding of the effects of each variable, see, for instance Capelle-Blancard et al [7].…”

Section: Robustness Checksmentioning

confidence: 99%

“…Previous related literature [7,8] controlled for gross domestic product (GDP) growth rate, inflation, fiscal condition (debt/GDP and Primary Balance (PB)/GDP), current account, liquidity ratio, country openness and sovereign credit ratings. For a more extensive discussion and understanding of the effects of each variable, see, for instance Capelle-Blancard et al [7]. To start, we considered these variables and assessed their significance as determinants of international government bond returns (Appendix B).…”

Section: Robustness Checksmentioning

confidence: 99%

“…Given that we rank government bonds at t according to countries' ESG scores available at t-1, the ESG scores used are lagged. Capelle-Blancard et al [7], who use lagged ESG scores, suggest that lagging ESG scores helps to avoid the endogeneity problems and simultaneity bias that may arise as a result of a contemporaneous bidirectional causality existing between ESG aspects and bond performance. Tables 3 and 4 display the results of applying the additional portfolio financial performance measures.…”

Section: Robustness Checksmentioning

confidence: 99%

“…Previous research has shown that ESG factors are valuable for government bonds. Capelle-Blancard et al [7] assessed whether ESG performance influences government bond spreads. They found that countries with good ESG performance tended to have less default risk and thus lower bond spreads.…”

Section: Introductionmentioning

confidence: 99%

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Financial Performance of Government Bond Portfolios Based on Environmental, Social and Governance Criteria

2019

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We evaluated the financial performance of government bond portfolios formed according to socially responsible investment (SRI) criteria. We thus open a discussion on the financial performance of SRI for government bonds. Our sample includes 24 countries over the period of June 2006 to December 2017. Using various financial performance measures, the results suggest that high-rated government bonds, according to environmental, social, and governance (ESG) dimensions, outperform low-ranked bonds under any cut-off, although differences are not statistically significant. These findings suggest that ESG screenings can be used for government bonds without sacrificing financial performance.

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Section: Robustness Checksmentioning

confidence: 99%

Section: Robustness Checksmentioning

confidence: 99%

Section: Robustness Checksmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Financial Performance of Government Bond Portfolios Based on Environmental, Social and Governance Criteria

2019

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“…One of the few academic research papers to study the relationship between ESG and sovereign bond performance is Capelle-Blancard et al (2017). In a comprehensive analysis of OECD sovereigns, it concludes that countries with good ESG performance tend to have less default risk and thus lower bond spreads.…”

Section: Sovereign Bondsmentioning

confidence: 99%

Incorporating Environmental, Social and Governance Factors into Fixed Income Investment

Inderst

Stewart²

2018

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The aim is for the World Bank and IFCmember of the World Bank Group focused on the private sectorand GPIF to collaborate on initiatives that promote strategies for including environmental, social and governance (ESG) criteria in investment decisions across asset classes. Ultimately, the goal is to direct more capital towards sustainable investments and leverage the private sector to achieve the scale of investment needed to meet the Sustainable Development Goals. The partnership reflects GPIF's strategic commitment to advancing the integration of ESG considerations into all asset classes of its portfolio. The research report is focused on integration of ESG considerations for fixed income. From the World Bank Group side, the research contributes to the commitment to maximizing finance for development and catalyzing the development towards more sustainable capital markets.

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Can we expect contribution from environmental, social, governance performance to sustainable development?

Tanjung

2021

Bus Strat Dev

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This work is among the first studies to review the Morgan Stanley Capital International (MSCI) ESG Leaders Index in Asian countries and other emerging markets, such as Brazil, China, and Russia. The relationships among gross domestic product (GDP), human development index (HDI), and a set of key indicators are the fundamental argument of this study. By applying 2SLS estimation from 2010 to 2018, this research examines the connection between environmental, social, governance (ESG) index, GDP growth, and HDI from nine countries as rated in the MSCI ESG Index. The objective is to test whether the index can be efficiently utilized to justify the notion that the adoption of ESG principles can positively influence sustainable development and inclusive growth. The post estimations reveal close relationships between the ESG index and GDP growth. However, the index is not an effective instrument for measuring the connection between HDI‐ESG because it has not yet had a direct effect on HDI. With this result, the index can be utilized to measure the connections with and investments made by countries and corporations for sustainable development.

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Environmental, Social and Governance (ESG) Performance and Sovereign Bond Spreads: An Empirical Analysis of OECD Countries

Abstract: Abstract. What are the determinants of borrowing cost in international capital

Cited by 20 publications

References 49 publications

Financial Performance of Government Bond Portfolios Based on Environmental, Social and Governance Criteria

Financial Performance of Government Bond Portfolios Based on Environmental, Social and Governance Criteria

Incorporating Environmental, Social and Governance Factors into Fixed Income Investment

Can we expect contribution from environmental, social, governance performance to sustainable development?

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