International market exposure to sovereign ESG

Published in the Journal of Sustainable Finance & Investment, by Taylor & Francis. https://doi.org/10.1080/20430795.2022.2148817

41 Pages Posted: 21 Jun 2022 Last revised: 28 Nov 2022

See all articles by Christian Morgenstern

Christian Morgenstern

Imperial College London - Department of Infectious Disease Epidemiology

Guillaume Coqueret

EMLYON Business School

James Kelly

Independent

Date Written: June 15, 2022

Abstract

We quantify equity and bond market sensitivity to sovereign ESG scores and their variations which, theoretically, is equivalent to evaluating the demand for ESG at the global scale. We do so by estimating a longitudinal model, at the issue level, that captures exposures to sovereign ESG factors for both equity and fixed income indices. In spite of the surging interest in ESG investing, our results do not support a strong impact of ESG factors on the returns of international markets, implying that the demand for ESG at the country level is not a significant driver of prices. Nevertheless, we document a strong association between GDP growth and ESG scores at the country level.

Keywords: factor demand; longitudinal models; sovereign ESG; sustainable investing

JEL Classification: G11, H11, Q59

Suggested Citation

Morgenstern, Christian and Coqueret, Guillaume and Kelly, James, International market exposure to sovereign ESG (June 15, 2022). Published in the Journal of Sustainable Finance & Investment, by Taylor & Francis. https://doi.org/10.1080/20430795.2022.2148817 , Available at SSRN: https://ssrn.com/abstract=4138136 or http://dx.doi.org/10.2139/ssrn.4138136

Christian Morgenstern (Contact Author)

Imperial College London - Department of Infectious Disease Epidemiology ( email )

South Kensington Campus
London, SW7 2AZ
United Kingdom

Guillaume Coqueret

EMLYON Business School ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

James Kelly

Independent ( email )

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