Bonds with Benefits: Impact Investing in Corporate Debt

Finacial Analyst Journal https://doi.org/10.1080/0015198X.2023.2280035

17 Pages Posted: 11 Nov 2022 Last revised: 11 Dec 2023

See all articles by Desislava Vladimirova

Desislava Vladimirova

Quoniam Asset Management GmbH

Jieyan Fang-Klingler

Quoniam Asset Management GmbH

Date Written: November 9, 2022

Abstract

The regulatory focus on quantifiable sustainable investing shifts investors’ demand towards impact products, thus challenging their alignment with the primary target of outperformance. Our study demonstrates the implications of impact investing on actively managed systematic credit portfolios using emission intensities, SDGs, and green bonds. We discover that sustainable assets trade at tighter spreads than their peers and provide coherent evidence of impact pricing. Nonetheless, neither impact measure exhibits a significant return premium. Finally, impact investors generate at most market returns, while systematic investors benefit from the low correlation between credit factors and impact measures to achieve their preferred dual target.

Keywords: Corporate bonds, impact investing, sustainability, systematic factors, credit factor investing

JEL Classification: G11, G12, G18, Q54

Suggested Citation

Vladimirova, Desislava and Fang-Klingler, Jieyan, Bonds with Benefits: Impact Investing in Corporate Debt (November 9, 2022). Finacial Analyst Journal https://doi.org/10.1080/0015198X.2023.2280035, Available at SSRN: https://ssrn.com/abstract=4272850 or http://dx.doi.org/10.2139/ssrn.4272850

Desislava Vladimirova (Contact Author)

Quoniam Asset Management GmbH ( email )

Frankfurt
Germany

Jieyan Fang-Klingler

Quoniam Asset Management GmbH ( email )

Frankfurt
Germany

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