ESG Performance and Corporate Bond Spreads
(2023) NEKH01 20231Department of Economics
- Abstract
- This paper examines the impact of ESG performance on corporate bonds spreads.
The spreads are determined by the risk factors of the investment and the demand by
the capital markets. It is therefore analysed whether ESG affects these determinants.
The hypothesis is that increased ESG performance should lead to lower bond
spreads because it has a positive effect on risk mitigation and investor demand. This
is tested on 981 corporate bonds from the EMU issued during the time period
2015-2023. The empirical findings support this hypothesis showing a negative
correlation between ESG performance and bond spreads. This is true for the
combined ESG score and the individual pillars E, S and G. Conclusively, this study
suggests that... (More) - This paper examines the impact of ESG performance on corporate bonds spreads.
The spreads are determined by the risk factors of the investment and the demand by
the capital markets. It is therefore analysed whether ESG affects these determinants.
The hypothesis is that increased ESG performance should lead to lower bond
spreads because it has a positive effect on risk mitigation and investor demand. This
is tested on 981 corporate bonds from the EMU issued during the time period
2015-2023. The empirical findings support this hypothesis showing a negative
correlation between ESG performance and bond spreads. This is true for the
combined ESG score and the individual pillars E, S and G. Conclusively, this study
suggests that investors prefer investments with high ESG performance. From a
management's perspective, the results indicate that investments in ESG will reduce
the cost of debt issuing for the company. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9120207
- author
- Windmar, Carl LU
- supervisor
- organization
- course
- NEKH01 20231
- year
- 2023
- type
- M2 - Bachelor Degree
- subject
- keywords
- ESG, Financial Performance, Z-spread, Bonds
- language
- English
- id
- 9120207
- date added to LUP
- 2024-01-22 15:40:25
- date last changed
- 2024-01-22 15:40:25
@misc{9120207, abstract = {{This paper examines the impact of ESG performance on corporate bonds spreads. The spreads are determined by the risk factors of the investment and the demand by the capital markets. It is therefore analysed whether ESG affects these determinants. The hypothesis is that increased ESG performance should lead to lower bond spreads because it has a positive effect on risk mitigation and investor demand. This is tested on 981 corporate bonds from the EMU issued during the time period 2015-2023. The empirical findings support this hypothesis showing a negative correlation between ESG performance and bond spreads. This is true for the combined ESG score and the individual pillars E, S and G. Conclusively, this study suggests that investors prefer investments with high ESG performance. From a management's perspective, the results indicate that investments in ESG will reduce the cost of debt issuing for the company.}}, author = {{Windmar, Carl}}, language = {{eng}}, note = {{Student Paper}}, title = {{ESG Performance and Corporate Bond Spreads}}, year = {{2023}}, }