Sovereign Bonds and Socially Responsible Investment

Bastien Drut ()

No 09-014.RS, Working Papers CEB from Université Libre de Bruxelles, Solvay Brussels School of Economics and Management, Centre Emile Bernheim (CEB)

Abstract: While the literature on Socially Responsible Investment (SRI) is mainly focused on the stock market, little attention has been paid to SRI in sovereign bonds. This paper investigates the effect of taking into account socially responsible indicators for countries, the Vigeo Sustainability Ratings (VSR), on the efficient frontier formed with the sovereign bonds of twenty developed countries. It shows that it is possible to increase the portfolios’ VSR rating without significantly harming the risk/return relationship. The analysis then focuses on specific ratings relating to a) the environment, b) social concerns, and c) public governance. The results suggest that socially responsible portfolios of sovereign bonds can be built without a significant diversification cost.

Keywords: Socially Responsible Investment; Sovereign Bonds; Portfolio Selection; Rating; Spanning Tests; Mean-variance efficiency; Portfolio Choice. (search for similar items in EconPapers)
JEL-codes: G11 G15 (search for similar items in EconPapers)
Date: 2009-03
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http://www.solvay.edu/EN/Research/Bernheim/documents/wp09014.pdf First version, 2009 (application/pdf)

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Working Paper: Sovereign Bonds and Socially Responsible Investment (2009)
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Persistent link: http://EconPapers.repec.org/RePEc:sol:wpaper:09-014

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