ESG and Corporate Bond: A yield spread approach

By Svetlana Borovkova & Zhiyu Zhang / October 2022

Sustainability is currently a prominent theme in the investment management. Regulators and investors require asset managers to measure and report sustainability metrics such as ESG (Environmental, Social and Governance) scores for their portfolios. For stock portfolios, this process is well underway, as is an ongoing discussion on whether ESG selection negatively impacts stock portfolio returns. However, for fixed income portfolios, ESG measurement and portfolio selection has not been widely addressed yet. With this paper we aim to address sustainability issues in corporate bond investing. Using Refinitiv ESG scores, we investigate how these scores relate to corporate bond yields and bond portfolio performance.