Doing well while doing good: ESG ratings and corporate bond returns

Sebastian A. Gehricke, Xinfeng Ruan and Jin E. Zhang

Applied Economics, 2024, vol. 56, issue 16, 1916-1934

Abstract: The relationship between ESG performance and equity returns has become a popular area of research, but the same is not yet the case for bond returns. In this paper, we explore whether incorporating ESG factors, beyond emissions into the bond portfolio investment process leads to under or out performance. We find that ESG investing in bond portfolios does not lead to over or under performance. In other words, you do not have to ‘pay to do good’. Further, in the period since the Paris agreement, Energy sector bond portfolio returns are positively related to ESG factors. This finding aligns with the theoretical prediction of Pedersen, Fitzgibbons, and Pomorski (2020), namely, that the ESG-return relationship should become positive as investors become more aware of ESG risks and opportunities. Overall, we show that Bond investors can ‘do well while doing good’.

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2023.2178624 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:56:y:2024:i:16:p:1916-1934

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2023.2178624

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().