TY - JOUR
T1 - Sovereign bond yield spreads and sustainability
T2 - an empirical analysis of OECD countries
AU - Capelle-Blancard, Gunther
AU - Crifo, Patricia
AU - Diaye, Marc-Arthur
AU - Oueghlissi, Rim
AU - Scholtens, Bert
N1 - Patricia Crifo acknowledges the support of the chair for Sustainable Finance and Responsible Investment (chair FDIR – Toulouse IDEI & Ecole Polytechnique), the chair for Energy and prosperity, finance and evaluation of energy transition, and the Research program Investissements d'Avenir (ANR-11-IDEX-0003/Labex Ecodec/ANR-11- LABX-0047).
PY - 2019/1
Y1 - 2019/1
N2 - We study whether and how a country's environmental, social, and governance (ESG) performance relates to its sovereign borrowing costs in international capital markets. We hypothesize that good ESG performance plays an economic role: It signals a country's commitment to sustainability and long-term orientation and is a buffer against negative shocks, leading to lower sovereign bond yield spreads. Using a sample of 20 OECD countries over the period 1996–2012, we show that countries with good ESG performance are associated with lower default risk and lower sovereign bond yield spreads. Moreover, we show that the social and governance dimensions have a significant negative association with sovereign bond yield spreads, whereas the environmental dimension does not.
AB - We study whether and how a country's environmental, social, and governance (ESG) performance relates to its sovereign borrowing costs in international capital markets. We hypothesize that good ESG performance plays an economic role: It signals a country's commitment to sustainability and long-term orientation and is a buffer against negative shocks, leading to lower sovereign bond yield spreads. Using a sample of 20 OECD countries over the period 1996–2012, we show that countries with good ESG performance are associated with lower default risk and lower sovereign bond yield spreads. Moreover, we show that the social and governance dimensions have a significant negative association with sovereign bond yield spreads, whereas the environmental dimension does not.
KW - ESG performance
KW - Sovereign bonds
KW - Sustainability
KW - Yield spreads
U2 - 10.1016/j.jbankfin.2018.11.011
DO - 10.1016/j.jbankfin.2018.11.011
M3 - Article
AN - SCOPUS:85056636627
SN - 0378-4266
VL - 98
SP - 156
EP - 169
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
ER -
