Do the SDGs affect sovereign bond spreads? First evidence

Eline Ten Bosch, Mathijs Van Dijk and Dirk Schoenmaker

No 16898, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the relation between a country's performance on the United Nations' Sustainable Development Goals (SDGs) and its sovereign bond spread. Using a novel country-level SDG measure for a global sample of countries, we find a significantly negative relation between SDG performance and credit default swap (CDS) spreads, while controlling for traditional macroeconomic factors. This effect is stronger for longer maturities, in line with the notion that the SDGs represent long-term objectives. The results are most consistent with perceived default risk driving this relation, rather than investor preferences. In sum, our initial evidence suggests that investing in the SDGs provides governments with financial benefits besides ecological and social welfare.

Keywords: Sustainable development goals; Sovereign credit default swaps; Sovereign credit spreads; Default risk; Country sdg performance (search for similar items in EconPapers)
JEL-codes: F34 G11 G12 H41 H62 (search for similar items in EconPapers)
Date: 2022-01
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