Do the SDGs Affect Sovereign Bond Spreads? First Evidence

44 Pages Posted: 1 Mar 2022

See all articles by Eline ten Bosch

Eline ten Bosch

Rotterdam School of Management, Erasmus University

Mathijs A. Van Dijk

Erasmus University Rotterdam (EUR)

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: January 11, 2022

Abstract

We study the relation between a country's performance on the United Nations' Sustainable Development Goals (SDGs) and its sovereign bond spread. Using a novel country-level SDG measure for a global sample of countries, we find a significantly negative relation between SDG performance and credit default swap (CDS) spreads, while controlling for traditional macroeconomic factors. This effect is stronger for longer maturities, in line with the notion that the SDGs represent long-term objectives. The results are most consistent with perceived default risk driving this relation, rather than investor preferences. In sum, our initial evidence suggests that investing in the SDGs provides governments with financial benefits besides ecological and social welfare.

Keywords: Sustainable Development Goals, Sovereign credit default swaps, Sovereign credit spreads, Default risk, Country SDG performance

JEL Classification: G11, G12, F34, H41, H62

Suggested Citation

ten Bosch, Eline and Van Dijk, Mathijs A. and Schoenmaker, Dirk, Do the SDGs Affect Sovereign Bond Spreads? First Evidence (January 11, 2022). Available at SSRN: https://ssrn.com/abstract=4006375 or http://dx.doi.org/10.2139/ssrn.4006375

Eline Ten Bosch (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

Burgemeester Oudlaan 50
Rotterdam
Netherlands

Mathijs A. Van Dijk

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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