ESG Investing
Bond Markets
Bond Markets
Extending ESG ratings to corporate bonds
While ESG screening has become standard practice in equity markets, its application to corporate bonds presents unique challenges. Our research develops a comprehensive framework for ESG integration in the fixed-income universe, examining the impact on portfolio risk and return characteristics.
The fixed-income market represents a significant portion of global investment assets, yet ESG integration in bond portfolios has lagged behind equities. Our research addresses this gap by proposing a methodology that accounts for the specific characteristics of corporate bonds, including credit risk, duration, and issuer ESG profiles.
We find that ESG screening can be effectively applied to corporate bond portfolios without significant sacrifice in risk-adjusted returns, while meaningfully improving the sustainability profile of the portfolio.
Working Paper
ESG Screening in the Fixed-Income Universe
Swiss Finance Institute Working Paper examining ESG integration methodologies for corporate bond portfolios.
F. Alessandrini, E. Jondeau
2021