Environmental, Social and Governance (ESG) performance and sovereign bond spreads: an empirical analysis of OECD countries

Gunthe Capelle-Blancard, Patricia Crifo, Rim Oueghlissi, Lambertus Johannes Regnerus Scholtens

Research output: Working paper

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What are the determinants of borrowing cost in international capital markets? Apart from macroeconomic fundamentals, are there any qualitative factors that might capture sovereign bond spreads? In this paper we consider to what extent Environmental, social and governance (ESG) performance can affect sovereign bond spreads. First, countries with good ESG performance tend to
have less default risk and thus lower bond spreads. Moreover, the economic impact is stronger in the long-run, suggesting that ESG performance is a long-lasting phenomenon. Second, we examine the financial impact of separate ESG dimensions, and find that the environmental dimension appears to
have no financial impact whereas governance weighs more than social factors. Third, we examine cross-countries differences and show that ESG performance has a more significant and stronger impact in the Eurozone than elsewhere in OECD countries. Fourth, we include evidence from the global financial crisis and find stronger influence of country sustainability performance during crisis period.
Original languageEnglish
Place of PublicationParis
Number of pages56
Publication statusPublished - 7 Mar 2017

Publication series

NameEconomiX Working Papers
PublisherUniversity of Paris West - Nanterre la Défense, EconomiX


  • ESG
  • Performance
  • Sovereign bond ratings
  • Bond yield spreads


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