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

By G. Capelle-Blancard, Patricia Crifo, Marc-Arthur Diaye, Rim Oueghlissi, Bert Scholtens. Journal of Banking & Finance, 2019

170 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/7529288c41cab67e5a0aa1f620c4b305d6528944

Citations in the corpus

• Climate Regulatory Risks and Corporate Bonds (2020, unknown): “, 2018; Flammer, 2021; Tang and Zhang, 2020; Zerbib, 2019), and the pricing effect of ESG on sovereign bonds (Margaretic and Pouget, 2018; Capelle-Blancard et al., 2019).”