This study relates corporate sustainability ratings (ESG scores) to the yields of bonds issued during the Covid-19 pandemic to assess whether there is a remuneration of the ESG factor in terms of lower financing costs. It also proposes an estimate of the contribution of the different channels through which the ESG factor affects bond yields, distinguishing between investor preferences for sustainability and risk factor reduction.
The study shows that firms with higher sustainability ratings were able to finance themselves at a lower cost, particularly when domiciled in advanced economies and during the most acute phase of the pandemic crisis. The study finds that the lower cost of financing depends both on investor preferences toward more sustainable financial assets and on risk-based considerations not related to firms' creditworthiness, such as exposure to climate risks.
Published in 2023 in: International Review of Financial Analysis, v. 88, Article 102653.
