ESG under the alpha lens
We find compelling evidence that ESG research deserves a place in credit investing, as high ESG scores reduce exposure to tail risk and enhance long-term returns.
Our «high ESG» bond portfolio shows 8% outperformance versus our «low ESG» bond portfolio. We also find negative returns to be larger and relatively more frequent among bonds from issuers with lower ESG ratings compared with bonds from issuers with higher ESG ratings. Additionally, our data clearly indicates that changes in ESG ratings act as a leading indicator of
creditworthiness. Taken altogether, we find ESG screening to be a useful tool for credit investors.
Investors, consumers and regulators are all starting to realise the cost of being unsustainable,
and focus is increasingly being directed towards ESG factors in credit investing. We find strong
arguments for why it makes sense to incorporate ESG into credit investing decisions.
Our analysis of investment grade corporate bond portfolios based on MSCI’s ESG scores shows that high ESG scores contribute to more stable portfolio returns during periods of high market volatility, which in turn has led to enhanced long-term returns. In addition, we find that ESG trends show merits as leading indicators of creditworthiness.
The information provided within this website is intended for background information only. The views and other information provided herein are the current views of Nordea Markets as of the date of publication and are subject to change without notice. The information provided within this website is not an exhaustive description of the described product or the risks related to it, and it should not be relied on as such, nor is it a substitute for the judgement of the recipient.
The information provided within this website is not intended to constitute and does not constitute investment advice nor is the information intended as an offer or solicitation for the purchase or sale of any financial instrument. The information provided within this website has no regard to the specific investment objectives, the financial situation or particular needs of any particular recipient. Relevant and specific professional advice should always be obtained before making any investment or credit decision. It is important to note that past performance is not indicative of future results.
Nordea Markets is not and does not purport to be an adviser as to legal, taxation, accounting or regulatory matters in any jurisdiction.
The information provided within this website may not be reproduced, distributed or published for any purpose without the prior written consent from Nordea Markets.