Assessing the role of ESG evaluation in market risk management for sovereign bond investments

Kento Hasegawa, Hiroyuki Higuchi, Kiichi Kitajima, Yasuhiro Komaru and Shintaro Suda

Journal of Sustainable Finance & Investment, 2025, vol. 15, issue 1, 77-104

Abstract: With the growing emphasis on responsible investing, the role of environmental, social, and governance (ESG) factors in risk management has become significant, extending to the field of sovereign bonds. This study examines the role of ESG evaluations in the risk management of sovereign bond investments. Across fifty countries, including developed and emerging countries, our findings indicate that, even after controlling each country's yield levels and fiscal conditions, nations with lower ESG scores tend to face higher market risks, notably regarding tail risk measures. This pattern is especially pronounced in the bonds of emerging countries. The research highlights that ESG evaluation of sovereign bonds can provide insight into the likelihood of unforeseen events, such as political turmoil and natural disasters, often not reflected in sovereign bond yields.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/20430795.2024.2428336 (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:jsustf:v:15:y:2025:i:1:p:77-104

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TSFI20

DOI: 10.1080/20430795.2024.2428336

Access Statistics for this article

Journal of Sustainable Finance & Investment is currently edited by Dr Matthew Haigh

More articles in Journal of Sustainable Finance & Investment from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().