The effect of countries’ ESG ratings on their sovereign borrowing costs.

Summary We examine whether the extra-financial performance of countries on environmental, social and governance (ESG) factors matters for sovereign bonds markets. Using a panel regression model over a data set with 23 OECD countries from 2007 to 2012, we show that ESG ratings significantly decrease government bond spreads. © 2017 Board of Trustees of the University of Illinois.