ESG and Bond Performance: Evidence from the Nordic

Abstract

This study examines whether corporate ESG performance has an effect on bond performance in the Nordic countries. There are two main theoretical views regarding ESG investments which are risk mitigation and resource depletion. ESG spendings are either seen as a way to lower the overall risk of the company and thus leading to lower spreads, or seen as a waste of resources which increase firm risk. We use two OLS regressions to test both the combined ESG scores’ and the individual pillar scores’ relationship with z-spreads. We find no significant results for the individual pillars of the score, whereas some weak evidence is found for the risk mitigation view for the combined ESG score. However, this evidence is insufficient, meaning that a negative relationship cannot be proven.