ESG and Corporate Credit Spreads

1 Pages Posted: 13 Jun 2018 Last revised: 27 Dec 2021

See all articles by Florian Barth

Florian Barth

Friedrich-Alexander-Universität (FAU) Erlangen-Nürnberg

Benjamin Hübel

HUK-COBURG Asset Management

Hendrik Scholz

Friedrich-Alexander-Universität Erlangen-Nürnberg

Date Written: March 1, 2021


We investigate the implications of environmental, social and governance (ESG) practices of firms for the pricing of credit default swaps (CDS). Our evidence indicates that higher ESG ratings mitigate credit risks of U.S. and European firms from 2007 to 2019. The risk mitigation effect is U-shaped across ESG quantiles, which is consistent with opposing effects of growing stakeholder influence capacity and diminishing marginal returns on ESG investments. We further reveal a mediating indirect volatility channel that substantially amplifies the direct effect of ESG on credit risk. A one-standard-deviation improvement in ESG ratings is estimated to reduce CDS spreads of low/medium/high ESG firms by approximately 4%/8%/3%.

Keywords: Corporate social responsibility (CSR); Enviromental, Social, Governance (ESG); Credit default swaps (CDS); Credit risk

JEL Classification: G12, G24

Suggested Citation

Barth, Florian and Hübel, Benjamin and Scholz, Hendrik, ESG and Corporate Credit Spreads (March 1, 2021). Available at SSRN: or

Florian Barth

Friedrich-Alexander-Universität (FAU) Erlangen-Nürnberg ( email )

Lange Gasse 20
Nuremberg, DE 90403

Benjamin Hübel (Contact Author)

HUK-COBURG Asset Management ( email )


Hendrik Scholz

Friedrich-Alexander-Universität Erlangen-Nürnberg ( email )

Lange Gasse 20
Lange Gasse 20,
Nürnberg, 90403

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