 ESG performance and the cost of debt. Evidence from the corporate bond marketPaolo Fiorillo, Antonio Meles, Antonio Ricciardi and Vincenzo Verdoliva International Review of Financial Analysis, 2025, vol. 102, issue C Abstract: We study the impact of ESG performance on the cost of debt in the primary corporate bond market. Using an international sample of 25,234 bonds from 2677 ESG-rated issuers, we analyse yield spreads between bonds from high- and low-ESG-rated issuers, finding lower yields (by about 10 bps) for high-ESG firms. Our results are robust to additional tests, including controls for endogeneity, and are mainly explained by the environmental and social pillars. We also find that this result is driven by more developed financial markets, likely affected by lower information frictions, and by countries where bankruptcy rules guarantee higher protection for bondholders, making them more willing to grant ESG premia. Finally, we observe lower yield spreads for bond issues that occurred after the introduction of the SFDR, highlighting the importance of regulations promoting socially responsible investments. Overall, our results suggest that firms can benefit from superior ESG performance in the form of lower borrowing costs in the corporate bond market. Keywords: ESG performance; Socially responsible investments; Corporate bond market; Bond yields (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:102:y:2025:i:c:s105752192500184x DOI: 10.1016/j.irfa.2025.104097 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
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