ESG and Bond Market Resilience: Evidence from the COVID Crisis

51 Pages Posted: 9 May 2023 Last revised: 20 Mar 2024

See all articles by Sudheer Chava

Sudheer Chava

Georgia Institute of Technology - Scheller College of Business

Polina Efremenko

University of Neuchatel - Institute of Financial Analysis

Carolina Salva

University of Neuchatel - Institute of Financial Analysis

Date Written: May 9, 2023

Abstract

We document a decline in CDS-bond basis and lower selling pressure during the COVID crisis for bonds issued by firms with high environmental and social (E&S) scores relative to bonds issued by low E&S firms. Bonds of high E&S firms experience lower selling pressure due to lower investor outflows from sustainability focused funds rather than fund managers discriminating among which bonds to sell. Our results highlight how the performance of bonds during a crisis is influenced not only by shifts in firm fundamentals but also by investor trading behavior and net flows into mutual funds.

Keywords: bond markets, COVID-19, ESG, selling pressure, fund flows

JEL Classification: G12, G23, M14

Suggested Citation

Chava, Sudheer and Efremenko, Polina and Salva, Carolina, ESG and Bond Market Resilience: Evidence from the COVID Crisis (May 9, 2023). Georgia Tech Scheller College of Business Research Paper No. 4443222, Available at SSRN: https://ssrn.com/abstract=4443222 or http://dx.doi.org/10.2139/ssrn.4443222

Sudheer Chava

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

HOME PAGE: http://https://fintech.gatech.edu

Polina Efremenko

University of Neuchatel - Institute of Financial Analysis ( email )

AL Breguet 2
Neuchatel, CH-2000
Switzerland

Carolina Salva (Contact Author)

University of Neuchatel - Institute of Financial Analysis ( email )

AL Breguet 2
CH-2000 Neuchatel
Switzerland

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