Sovereign bond yield spreads and sustainability: an empirical analysis of OECD countries

Gunther Capelle-Blancard, Patricia Crifo, Marc-Arthur Diaye, Rim Oueghlissi, Bert Scholtens*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

19 Citations (Scopus)
9 Downloads (Pure)


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.

Original languageEnglish
Pages (from-to)156-169
Number of pages14
JournalJournal of Banking and Finance
Early online date15 Nov 2018
Publication statusPublished - Jan 2019


  • ESG performance
  • Sovereign bonds
  • Sustainability
  • Yield spreads


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